Bond rally nearing an end?

The report was exactly what was to be expected anyways. As I mentioned yesterday, it's the first quarter that was suspected to be particularly strong and since we're already in the middle of March, they had to tone down their rethorics a little bit.

The stock market is reacting with enthousiasm while the bond market...
((((crickets))))
 
Everyone and their mother still short vol in April, May, and June, probably won't change on that front anytime soon. At this point data is solid, other data soft, talk about inflation hawkish, then dovish, then hawkish again. No one has conviction on either side. Stuck in 4.69% to 4.80% in tens until one side makes a move. Tens are only part of the curve where the market is still heavily long, upwards of 150,000 contracts compared to net short Eurodollars, five-years, and the bond. I think that lends itself to a possible pain trade to 4.93% at some point and we will see who gets pushed out in the process, if mortgage hedging accelerates above 4.85% it should get there, but generally they hedge less in selloffs, watch the 10yr swap cash for signs of guys paying in swaps and subsequently hedging in Treasuries during selloffs.
 
I have recently been studying the fundamentals involved in bond trading, could one of you inform me on how government treasury auctions effect the bond future prices?
Thanks in advance.
 
Quote from steveosborne:

2:00 at http://www.federalreserve.gov/Fomc/BeigeBook/2006/20060315/default.htm

1 minute before my post :-)
More...

LOL you are quick.
Yes, stocks loved it my NQ is still running.
Bonds were kind of mute about the whole thing.

The 2yr today is displaying that it's top in yield is in.
The 90day needs a bit of a pop 4.65% EOD ???

Think the 10yr/30yr should be bouncing a bit more. A gap up and then nothing? Strange for a 4th wave. A rally to mid - 111 on the 30yr should work?
 
Quote from mcurto:

Everyone and their mother still short vol in April, May, and June, probably won't change on that front anytime soon. At this point data is solid, other data soft, talk about inflation hawkish, then dovish, then hawkish again. No one has conviction on either side. Stuck in 4.69% to 4.80% in tens until one side makes a move. Tens are only part of the curve where the market is still heavily long, upwards of 150,000 contracts compared to net short Eurodollars, five-years, and the bond. I think that lends itself to a possible pain trade to 4.93% at some point and we will see who gets pushed out in the process, if mortgage hedging accelerates above 4.85% it should get there, but generally they hedge less in selloffs, watch the 10yr swap cash for signs of guys paying in swaps and subsequently hedging in Treasuries during selloffs.
More...

Inflation doesn't even have conviction :) When the CRB looks likes its about to break it rallies, then starts to break again, and then rallies. Gold is showing a potential double bottom @ $534, and crude is showing some strength in the forward months. Looks like inflation will be back if these hold these levels.

So they are net long the 10yr and short the 30yr? Interesting!
 
Quote from gharghur2:

The 2yr today is displaying that it's top in yield is in.
More...
On that matter, Congress needs to raise the debt ceiling by tomorrow evening for the Treasury to go ahead with its two- and five-year auction announcements next week. If not, we would end up with a relative shortage of those in the market.
 
Thanks!
Interesting, not even a blip on the chart.

The way things are setting up in the stock indices, and the bills/notes, I'd bet on one more scheduled rate hike: this one.

Think you're right in thinking Bernanke will have to show he means business and kick rates up another notch. So does the market! But if my count is correct on the 2yr, I can see a drop of nearly 50 basis points or more in the coming weeks/months.
Chart below:
 

Attachments

The reason for the blip on the chart was because the roll from the old 30yr to the recently auctioned 30yr was about -13 basis points. Thus, if one was to roll the last 30yr into the new one they had to pay up in price equivalent to 13 basis points lower in yield, which is why the bid-to-cover was so strong. Many of the hedge funds had bets placed on this spread between the old issue and new issue, and also put bets on after the auction shorting the old issue and buying the new one, getting smoked as that spread steepened a fair amount. As for the debt ceiling, Congress is just trying to make the news with their political games, they should pass it right on time, repo traders on the street either way have squeezed the two-year note based on the miniscule chance that the auctions don't happen.
 
You must log in or register to reply here.
Back
Top