Bond rally nearing an end?

[daddyeaux]

let's look at it peak to trough, knowing that every peak may have a trough half as high.

still, an enormous net sigma swing.....just in the 10 year

I dont know, when I saw the chart, I was in shock............

no wonder Morgan and Citi keep hammering the gold market...gold is the canary in the bond pit

 

[futures_shark]

This whole rally started after the jun 28th statement when everyone started speculating on a pause with the next move being a decrease. As it becomes more apparent that the next move may be an increase I see no reason why the curve doesn't flip to being normal or at least goes back to flat.

 

[Il Principe]

Quote from futures_shark:

This whole rally started after the jun 28th statement when everyone started speculating on a pause with the next move being a decrease. As it becomes more apparent that the next move may be an increase I see no reason why the curve doesn't flip to being normal or at least goes back to flat.

If it's apparent that the next move is an increase, the curve will continue to invert, not flip back to normal or flat.

 

[futures_shark]

May thru June when the 30yr was trading near a high of 5.3% the yield curve was flat to slightly normal. It was becoming flatter as more people began betting on a pause in increases.

If the bonds start heading for new lows that would be a normalization of the yield curve towards flat from the current inversion.

Of course the curev is not toally inverted right now. The 5-30 has never been inverted. It just the short end being forced up by the fed not market forces.

 

[drsteph]

Quote from futures_shark:

This whole rally started after the jun 28th statement when everyone started speculating on a pause with the next move being a decrease. As it becomes more apparent that the next move may be an increase I see no reason why the curve doesn't flip to being normal or at least goes back to flat.

If that happens, that would be HUGE. Huge. So many people would get caught with their pants down that it would just not be pretty.

Can't fathom it, frankly.

 

[daddyeaux]

if the next increase announcement is coupled with "further rate increases may be needed"

open the bombay doors

 

[onlytronalso]

Seems all that open interest needs to be closed out eventually.

Are the specs buying and the CB's hedging ???

 

[JohnL111]

Quote from daddyeaux:

ok bond guys....

I mean are hedge funds really responsible for the parabolic rise in OI?

[Note: This post is out of sequence] I think that the reason why open interest has exploded in the treasury complex is the outflows of money out of traditional FI and into alternative FI strategies. I am sure that if you look at the numbers from pension funds(look in recent issues of P&I mag), they have been very active moving money to alternatives.

Of course, most of these strategies are just leveraged-up vanilla strategies. Here is an excerpt from a e-mail promoting one of these managers:

‘The fund has demonstrated substantive diversification through non-correlation to both traditional assets as well as most hedge fund sectors since inception. It is liquid, transparent, and scalable as a result of the use of exchange traded futures…The manager establishes the fund's monthly directional positions either long or short, through investing in 10yr Treasury note futures. The fund is designed to generate absolute returns regardless of the interest rate direction, and has been able to do that during a period when interest rates have proved difficult for many to exploit.’

I just wonder how many of these guys will survive a 3-4 sigma move like stocks in ’87.

 

[onlytronalso]

Quote from JohnL111:

[‘The manager establishes the fund's monthly directional positions either long or short, through investing in 10yr Treasury note futures. The fund is designed to generate absolute returns regardless of the interest rate direction, and has been able to do that during a period when interest rates have proved difficult for many to exploit.’
[As long as interest rates do not move too far, too fast]

Another WE HAVE the MARKET FIGURED OUT program waiting to self destruct in 15 seconds. Mission Impossible!

 

[daddyeaux]

If the NET LONG OI chart I posted was donut futures, there would have been "it's a blow off top of all time" kinda talk....

yet the hamster analysts on CNBC must have big bond houses that require regular feeding.......

this is kinda bizarre....awaiting a resolution

NK preparing a 2nd firecracker, well what the hell, let her rip