Bond rally nearing an end?

Quote from steveosborne 03-01-06 10:23 AM:

Gold is going up (and oil is about to follow); the stock market has been going higher on strong economic data; so we might have some inflationary concerns building up.
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What started on March 1st when the inflation risk premium started to build up might be unwinding. Today, ALL MARKETS are lowering their inflation expectations:

1. Bonds. 10 yrs slightly down but 30 yrs flat.
2. Stocks. Cyclicals are up while growth stocks are down.
3. Oil and gold. Dropping.
4. Dollar. Bouncing.
 
Quote from gharghur2:

Hi John,

Not certain that I agree.
It appears that BB wants two days to cover all scenarios.

Also, I believe the objective of the FED, at this point, is to actually slow down the economy, so that the inflationary pressures will ease somewhat. Then, standby and let the economy recover on its own. They repeatedly refer to capacity utilization and employment as being historically higher than acceptable levels under the current environment.
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The problem with attempting to slow down the economy is that monetary policy is a blunt instrument (more like a butter knife than a scalpel). Unless you move rates sharply in a short period of time, it is difficult to change market behavior.

The Greenspan Fed got away with its fine-tuning of monetary policy because of the monster gains in productivity keeping inflation down. I am afraid that BB may see stagflation as the result of his dovish policies.
 
That big Japanese account is beginning to accumulate July 103 puts in the 10yr options. They have been quiet the last week or so and are out of most of their May options (expiring tomorrow) and the June as well. This will be interesting to see if they slowly or quickly build a position in July. If this position gets big fast it says the Japanese will not be showing up at the TIPS auctions next week and furthermore, will not be seen at the May Treasury refunding. A boatload of 10yr futures have traded give or take a few ticks around 105-20 the past two days. I would say about 50,000, all paper, most of it yesterday EDF Man. One would think there are some stops building around the recent lows of 105-10. Someone is also now long about 20,000 by 40,000 at least in the July 103-104 Put spread 1x2 in the ten year options, a new position this week, again all EDF Man pit and screen.
 
Quote from mcurto:

That big Japanese account is beginning to accumulate July 103 puts in the 10yr options. They have been quiet the last week or so and are out of most of their May options (expiring tomorrow) and the June as well. This will be interesting to see if they slowly or quickly build a position in July. If this position gets big fast it says the Japanese will not be showing up at the TIPS auctions next week and furthermore, will not be seen at the May Treasury refunding. A boatload of 10yr futures have traded give or take a few ticks around 105-20 the past two days. I would say about 50,000, all paper, most of it yesterday EDF Man. One would think there are some stops building around the recent lows of 105-10. Someone is also now long about 20,000 by 40,000 at least in the July 103-104 Put spread 1x2 in the ten year options, a new position this week, again all EDF Man pit and screen.
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Hi Mcurto

Wow! July 103's. They been pretty good about this market. I'd venture to say they will start building slowly. Might be a hedge again. Who's this EDF man?

thx :)
 
EDF Man is actually Man Financial, huge brokerage house with operations in London, New York City, Chicago, all over the place. It could be any number of $1 billion plus hedge funds out there or even a bank trader, not really sure who their biggest customers are. They like to use the screen for some of their options stuff because they can get double brokerage, match up a screen local and customer, take the pit out of the loop, has been happening with them the past few months. The worst thing is the pit will sometimes have a better market, especially in the 30yr, yet they will still put some of the orders on the screen. Oh well.
 
I'm telling you folks, the curve is gonna bounce around invert level then take off north ... institutioners are getting excited about it (the turn that is.)

Its not a day trade but one of those that begins every several years - and makes or breaks careers.

We should dive below invert again then watch the postions pile on. We're only seeing the genesis now and looking on in wonder ...
 
Does anyone know where I can find this entire paper?

"DYNAMICS OF THE SHAPE OF THE YIELD CURVE" - 1997

On the Journal of Fixed Income I cannot even find a summary of this paper.

Thanks.
 
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