Bond rally nearing an end?
- Thread starter gharghur2
- Start date
I think that the price action we had in the bond market during the past few days was residual activity from an ending trend exacerbated by concerns about the conduct of monetary and exchange rate policies.
But things should get better now as our leaders are doing the damage control we were hoping for.
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"The inflation outlook is at the borderline of acceptable and perhaps moving beyond,'' Lacker said in response to questions at a conference for bank supervisors in Norfolk, Virginia. "In circumstances like that, containing inflation has to be the primary focus.''
-- Bloomberg. May 18, 2006 13:20 EDT
"Let me state at the outset: A strong dollar is in our nation's interest (....)"
-- Treasury Secretary John Snow. May 18, 2006
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Maybe a stupid question ... is there a contract that trades which represents the yield curve (i.e. 2-10 spread)? I searched the CME and CBOT sites, but didn't find one.
Other than buying/selling x amount of 2 yrs (or eurodollars) and selling/buying y amount of 10 yrs, I don't see another way to do it.
Other than buying/selling x amount of 2 yrs (or eurodollars) and selling/buying y amount of 10 yrs, I don't see another way to do it.
Maybe a stupid question ... is there a contract that trades which represents the yield curve (i.e. 2-10 spread)? I searched the CME and CBOT sites, but didn't find one.
Other than buying/selling x amount of 2 yrs (or eurodollars) and selling/buying y amount of 10 yrs, I don't see another way to do it.
Other than buying/selling x amount of 2 yrs (or eurodollars) and selling/buying y amount of 10 yrs, I don't see another way to do it.
that's how it's done. The ratio is currently 1.7 ZT / 1 ZN
JohnL,
A few guys were talking about the flight-to-quality from the EM's earlier this week, but nothing on that front today really. I can tell you a lot of fast money hedge funds were active today and were behind the bid in the 30yr from the opening bell (with one fund out of NYC buying about 6000 before Claims). The belly of the curve underperformed vs. the wings of the curve, which means real money accounts were not active and not willing to chase this move (also heard they didn't do much from a cash contact). Another thing that is very puzzling to me on this upmove is that the 10Y swaps over Treasuries haven't budged. They have remained at 52.25 to 52.5 bps over the TY the last two days, on a full point move off of contract lows, this makes absolutely no sense. Shouldn't the convexity hedgers be hammering the swaps? Countrywide is long boatloads of the August 106 calls (rolled 30,000 from the July 106's into the Aug 106 yesterday) and has even begun to take profits on some of the August. If they begin to unload bigtime I would be worried how long we can stay at these levels. Continuing to monitor 10Y swaps as well, they should be narrowing, if they go bid tomorrow should be a good sell signal in outright 10Y. GCM looking to take profits on flatteners and play the steepeners around +11.5 to +13 bps in cash 2-10s.
A few guys were talking about the flight-to-quality from the EM's earlier this week, but nothing on that front today really. I can tell you a lot of fast money hedge funds were active today and were behind the bid in the 30yr from the opening bell (with one fund out of NYC buying about 6000 before Claims). The belly of the curve underperformed vs. the wings of the curve, which means real money accounts were not active and not willing to chase this move (also heard they didn't do much from a cash contact). Another thing that is very puzzling to me on this upmove is that the 10Y swaps over Treasuries haven't budged. They have remained at 52.25 to 52.5 bps over the TY the last two days, on a full point move off of contract lows, this makes absolutely no sense. Shouldn't the convexity hedgers be hammering the swaps? Countrywide is long boatloads of the August 106 calls (rolled 30,000 from the July 106's into the Aug 106 yesterday) and has even begun to take profits on some of the August. If they begin to unload bigtime I would be worried how long we can stay at these levels. Continuing to monitor 10Y swaps as well, they should be narrowing, if they go bid tomorrow should be a good sell signal in outright 10Y. GCM looking to take profits on flatteners and play the steepeners around +11.5 to +13 bps in cash 2-10s.
Resistance under attack this morning. 107 for bonds and 85 for the dollar index. After establishing 68 as a rock hard bottom Wednesday, the oil market is now testing 70 as the upper limit of a trading range. A $2 range for oil would be very narrow so 70 will probably break.