Bond rally nearing an end?

[mcurto]

JohnL,

Your quesiton on the Merrill MOVE index. I haven't looked at it since it was at its record lows in February but would imagine it hasn't caught a huge bid since then. The huge vol sellers, basically Goldman in the 10yr, have been quiet for about three weeks or so. Maybe this is finally the bottom in vol, tough to tell, but they are definitely not selling it aggressively. No huge buyers of it yet either in terms of paper. The 10yr swaps cash have come in huge the last week or so to the 10yr Treasury, from about 54.75 basis points over to 51.50 basis points on the close today. Not a good sign for volatility going forward.

 

[gharghur2]

Quote from sheridan:

a standard bar chart shows that the next area of congestion is in the 109 area and the volume chart-ex chart

http://www.chart-ex.com/charts/30_year_tbonds_monthly.htm

confirms high volume area of 10903-10907

Thanks! That kind of fits with what I'm seeing technically too

 

[gharghur2]

Consumer confidence hits its highest level in 5 years and the markets sell off ? Am I missing something here ?

 

[Johnny Walker]

That number was awesome put my long term trade way back in the green. What is there not to be confident about. Low unemployment, housing holding up mostly, business seem strong, stocks going up. Plus if you believe in government conspiracy it is this administrations best interest to keep numbers like this coming out. Market sold off because this will cause more inflationary pressure causing the fed to raise rates.

 

[gharghur2]

So the market reaction? Higher rates?
Isn't that already discounted?

 

[drsteph]

Quote from Johnny Walker:

That number was awesome put my long term trade way back in the green. What is there not to be confident about. Low unemployment, housing holding up mostly, business seem strong, stocks going up. Plus if you believe in government conspiracy it is this administrations best interest to keep numbers like this coming out. Market sold off because this will cause more inflationary pressure causing the fed to raise rates.

Hedonic adjustments causing numbers to stay within acceptable limits with no real relationship to reality? You don't say? I am shocked... shocked!

 

[steveosborne]

Quote from Johnny Walker:

Market sold off because this will cause more inflationary pressure causing the fed to raise rates.

Exactly, and the yield curve that was flattening steepened after that.

 

[gharghur2]

Rates increases are already expected. Everybody, by now, knows long term rates are rising. Even the consumers that are absorbing the higher costs of energy. Fail to see the same redundant logic over and over again Wall Street seems to imply.

In the 70/80's, when energy costs took off, consumer confidence plunged. Even last year there was an impact. With $3.00 gas today, consumers are still confident about the future.

 

[steveosborne]

Quote from gharghur2:

Rates increases are already expected. Everybody, by now, knows long term rates are rising. Even the consumers that are absorbing the higher costs of energy. Fail to see the same redundant logic over and over again Wall Street seems to imply.

In the 70/80's, when energy costs took off, consumer confidence plunged. Even last year there was an impact. With $3.00 gas today, consumers are still confident about the future.

Yes, rate increases are expected but for the last few days the yield curve was flattening while markets were lowering their expectations about growth and inflation and now, we're back to where we were a week ago, except this time oil is going down. Markets are in a martini shaker right now and basically impossible to trade.

 

[Johnny Walker]

I totally disagree with you about rate increases being expected especially the increase after the May 10 meeting . Yesterdays rally in treasuries was traders putting in their bets that that the economy is beginning to soften which would lead to a possible rate pause after May 10. These numbers today totally contradicted those expectations which is the reason for the violent reaction. The fed itself still has not decided (claimed they are data dependent) whether they will raise two more times or not.