Looks like we're getting close to a signficant top in Bonds.
Still days away ... but getting there nonetheless.
Still days away ... but getting there nonetheless.
You are using an out of date browser. It may not display this or other websites correctly.
You should upgrade or use an alternative browser.
You should upgrade or use an alternative browser.
Bond rally nearing an end?
- Thread starter gharghur2
- Start date
There are some worries on CPI for quite a few of the longs out there. Enough worries that paper is now long over 150,000 Oct 106 puts in the 10yr options. This is basically a point stop loss on positions that got long with the 10yr around 107-00 give or a 5-10 ticks. I haven't seen the estimates yet but if the number prints .1 or .2 higher the market could stand a bit of a correction as everyone is already loaded up long. How many guys have you heard of out there saying "Man, if this months CPI is way higher than expected I am going to buy even more 10yr notes". I might buy these puts as a pure lotto ticket, doubtful even on a high print these will go in the money but may be able to double your money quickly as the knee-jerk on a number .2 higher than expected would be massive.
Received the note below from one of my brokers. A couple questions for the board here:
Fed officials have been known to communicate with a few market reporters in order to shape expectations. Anyone have a read on which reporters are thought to closely reflect Fed thought? Also, also what to make of this Beckner guy, and who the 'ell is Market News International?
===================
Steven Beckner, Market News article which came out at 3:01 pm NY time, (8:01 pm London) or just 1 minute after Open Outcry trade had closed in Chicago, and therefore this article was likely missed by many market participants...
Beckner as we know has been writing with a Hawkish Bias, but this article comes across even more Hawkish as he quotes Senior Fed Sources...
This article pressured Treasuries late NY, in the final two hours of trade, with Cash Two's falling from 100-05 to 100-04 (+1.7 bps in yield) and Eurodollars slipping .5 to 1 tic. I would think that if there are no terror events over the weekend (fingers crossed), then we are likely to come under further pressure come Monday Morning in Asia.
This is worth a quick read... a couple of quick points/summary...
"It is felt at the Fed that many financial market participants
misinterpreted the FOMC minutes as more dovish than was intended,
Market News International is reliably informed."
"Senior Fed sources deplore the way many in the markets seem to
have missed or downplayed those misgivings. They were also taken aback by the presumption of many on Wall Street that the FOMC is finished raising
rates, even though they say the minutes were meant to signal that the
FOMC intended to leave the door open to further credit tightening."
"To the surprise of some at the Fed, the markets focused primarily on the hopes for lower inflation and the reasons why the majority felt the FOMC could safely pause contained in the minutes."
"Sources pointed to other key passages in the minutes that
conveyed a more hawkish, or at least more ambiguous, message, complaining that those words got insufficient attention in the markets and, in some
cases, the press."
Kudo's Andrew for the heads up on this
************************* Full story below
***********************************
Sources: Fed Surprised By Market Reaction to FOMC Minutes>
By Steven K. Beckner
Market News International - There was a certain amount of surprise
and bemusement, if not dismay, in Federal Reserve circles at the way
the minutes of the Aug. 8 Federal Open Market Committee meeting were
interpreted.
It is felt at the Fed that many financial market participants
misinterpreted the FOMC minutes as more dovish than was intended,
Market News International is reliably informed.
Only one FOMC member, Richmond Federal Reserve Bank President
Jeffrey Lacker, dissented against leaving monetary policy unchanged on
Aug. 8, but the minutes that were released on Aug. 29 revealed that
other members also had qualms about leaving the federal funds rate
unchanged.
Senior Fed sources deplore the way many in the markets seem to have missed or downplayed those misgivings. They were also taken aback by the presumption of many on Wall Street that the FOMC is finished raising
rates, even though they say the minutes were meant to signal that the
FOMC intended to leave the door open to further credit tightening.
On the day that the minutes were released, there was trepidation
on Wall Street that the minutes might have a "hawkish" tone, showing a
greater willingness to resume raising rates. When the minutes were
released, they were widely interpreted by relieved traders prone to pushing bond prices higher as confirming an FOMC inclination to stay on hold.
To the surprise of some at the Fed, the markets focused primarily on the hopes for lower inflation and the reasons why the majority felt the FOMC could safely pause contained in the minutes.
Sources pointed to other key passages in the minutes that conveyed
a more hawkish, or at least more ambiguous, message, complaining that
those words got insufficient attention in the markets and, in some cases, the press.
Most notably, the minutes stated, "In view of the elevated readings
on costs and prices, many members thought that the decision to keep
policy unchanged at this meeting was a close call and noted that additional firming could well be needed."
What's more, the minutes took special pains to communicate that
the Aug. 8 rate announcement was not intended to signal to end tightening:
"All members agreed that the statement to be released after the meeting should convey that inflation risks remained dominant and that
consequently keeping policy unchanged at this meeting did not necessarily mark the end of the tightening cycle."
The minutes disclosed that the FOMC majority simply felt that,
since the effects of 17 prior rate hikes had not been fully felt and since staying on hold posed few risks, "keeping policy unchanged at this meeting would allow the Committee to accumulate more information before judging whether additional firming would be necessary."
Since the release of the minutes public comments by various Fed
officials have helped clarify the FOMC's intent by making clear that they remain prepared to raise rates further, if needed, to curb inflation.
For example, the day after the minutes were published, Dallas
Federal Reserve Bank President Richard Fisher warned, "If anybody tells you with absolute conviction that the Fed is done raising interest rates or with equal conviction that they have only paused and will raise rates
more starting in September or October, remind yourself that at best --
and I'm being generous here -- they are only guessing."
St. Louis Fed President William Poole, who will be an FOMC voter
at the October and December meetings and then all of next year, and voting Cleveland Fed President Sandra Pianalto have both stressed the
need to bring down inflation and control inflation expectations.
San Francisco Fed President Janet Yellen, generally regarded as a
less hawkish FOMC voter, said yesterday that the Fed's current policy
stance should gradually bring down "uncomfortably high" inflation, but
added that so long as inflation remains "too high, policy must have a
bias toward further firming."
Though hopeful inflation will be brought down gradually, Yellen
said she "will be focused on the notable upside risks in the outlook."
And she said she has become "less sanguine" about labor compensation
pressures than she was a month ago.
Fed officials have been known to communicate with a few market reporters in order to shape expectations. Anyone have a read on which reporters are thought to closely reflect Fed thought? Also, also what to make of this Beckner guy, and who the 'ell is Market News International?
===================
Steven Beckner, Market News article which came out at 3:01 pm NY time, (8:01 pm London) or just 1 minute after Open Outcry trade had closed in Chicago, and therefore this article was likely missed by many market participants...
Beckner as we know has been writing with a Hawkish Bias, but this article comes across even more Hawkish as he quotes Senior Fed Sources...
This article pressured Treasuries late NY, in the final two hours of trade, with Cash Two's falling from 100-05 to 100-04 (+1.7 bps in yield) and Eurodollars slipping .5 to 1 tic. I would think that if there are no terror events over the weekend (fingers crossed), then we are likely to come under further pressure come Monday Morning in Asia.
This is worth a quick read... a couple of quick points/summary...
"It is felt at the Fed that many financial market participants
misinterpreted the FOMC minutes as more dovish than was intended,
Market News International is reliably informed."
"Senior Fed sources deplore the way many in the markets seem to
have missed or downplayed those misgivings. They were also taken aback by the presumption of many on Wall Street that the FOMC is finished raising
rates, even though they say the minutes were meant to signal that the
FOMC intended to leave the door open to further credit tightening."
"To the surprise of some at the Fed, the markets focused primarily on the hopes for lower inflation and the reasons why the majority felt the FOMC could safely pause contained in the minutes."
"Sources pointed to other key passages in the minutes that
conveyed a more hawkish, or at least more ambiguous, message, complaining that those words got insufficient attention in the markets and, in some
cases, the press."
Kudo's Andrew for the heads up on this
************************* Full story below
***********************************
Sources: Fed Surprised By Market Reaction to FOMC Minutes>
By Steven K. Beckner
Market News International - There was a certain amount of surprise
and bemusement, if not dismay, in Federal Reserve circles at the way
the minutes of the Aug. 8 Federal Open Market Committee meeting were
interpreted.
It is felt at the Fed that many financial market participants
misinterpreted the FOMC minutes as more dovish than was intended,
Market News International is reliably informed.
Only one FOMC member, Richmond Federal Reserve Bank President
Jeffrey Lacker, dissented against leaving monetary policy unchanged on
Aug. 8, but the minutes that were released on Aug. 29 revealed that
other members also had qualms about leaving the federal funds rate
unchanged.
Senior Fed sources deplore the way many in the markets seem to have missed or downplayed those misgivings. They were also taken aback by the presumption of many on Wall Street that the FOMC is finished raising
rates, even though they say the minutes were meant to signal that the
FOMC intended to leave the door open to further credit tightening.
On the day that the minutes were released, there was trepidation
on Wall Street that the minutes might have a "hawkish" tone, showing a
greater willingness to resume raising rates. When the minutes were
released, they were widely interpreted by relieved traders prone to pushing bond prices higher as confirming an FOMC inclination to stay on hold.
To the surprise of some at the Fed, the markets focused primarily on the hopes for lower inflation and the reasons why the majority felt the FOMC could safely pause contained in the minutes.
Sources pointed to other key passages in the minutes that conveyed
a more hawkish, or at least more ambiguous, message, complaining that
those words got insufficient attention in the markets and, in some cases, the press.
Most notably, the minutes stated, "In view of the elevated readings
on costs and prices, many members thought that the decision to keep
policy unchanged at this meeting was a close call and noted that additional firming could well be needed."
What's more, the minutes took special pains to communicate that
the Aug. 8 rate announcement was not intended to signal to end tightening:
"All members agreed that the statement to be released after the meeting should convey that inflation risks remained dominant and that
consequently keeping policy unchanged at this meeting did not necessarily mark the end of the tightening cycle."
The minutes disclosed that the FOMC majority simply felt that,
since the effects of 17 prior rate hikes had not been fully felt and since staying on hold posed few risks, "keeping policy unchanged at this meeting would allow the Committee to accumulate more information before judging whether additional firming would be necessary."
Since the release of the minutes public comments by various Fed
officials have helped clarify the FOMC's intent by making clear that they remain prepared to raise rates further, if needed, to curb inflation.
For example, the day after the minutes were published, Dallas
Federal Reserve Bank President Richard Fisher warned, "If anybody tells you with absolute conviction that the Fed is done raising interest rates or with equal conviction that they have only paused and will raise rates
more starting in September or October, remind yourself that at best --
and I'm being generous here -- they are only guessing."
St. Louis Fed President William Poole, who will be an FOMC voter
at the October and December meetings and then all of next year, and voting Cleveland Fed President Sandra Pianalto have both stressed the
need to bring down inflation and control inflation expectations.
San Francisco Fed President Janet Yellen, generally regarded as a
less hawkish FOMC voter, said yesterday that the Fed's current policy
stance should gradually bring down "uncomfortably high" inflation, but
added that so long as inflation remains "too high, policy must have a
bias toward further firming."
Though hopeful inflation will be brought down gradually, Yellen
said she "will be focused on the notable upside risks in the outlook."
And she said she has become "less sanguine" about labor compensation
pressures than she was a month ago.
Quote from mcurto:
There are some worries on CPI for quite a few of the longs out there. Enough worries that paper is now long over 150,000 Oct 106 puts in the 10yr options. This is basically a point stop loss on positions that got long with the 10yr around 107-00 give or a 5-10 ticks. I haven't seen the estimates yet but if the number prints .1 or .2 higher the market could stand a bit of a correction as everyone is already loaded up long. How many guys have you heard of out there saying "Man, if this months CPI is way higher than expected I am going to buy even more 10yr notes". I might buy these puts as a pure lotto ticket, doubtful even on a high print these will go in the money but may be able to double your money quickly as the knee-jerk on a number .2 higher than expected would be massive.
They might be worth a nibble pretty soon.
BlueHorseshoe,
I have no idea who Steven Beckner is, but his article seems to be spot on.
I have not commented on the market's interpretation of the Fed these last couple of weeks because I'm not a long term trader. As the reports came out I was amazed that the market took everything as a positive. To me the reports were at best less negative than usual, but certainly I wouldn't have placed "bets" that the Fed is done.
Mr. Beckner has certainly put in to words what I've been thinking these last couple of weeks.
Keep posting stuff like this. Good find!
Regards,
John
I have no idea who Steven Beckner is, but his article seems to be spot on.
I have not commented on the market's interpretation of the Fed these last couple of weeks because I'm not a long term trader. As the reports came out I was amazed that the market took everything as a positive. To me the reports were at best less negative than usual, but certainly I wouldn't have placed "bets" that the Fed is done.
Mr. Beckner has certainly put in to words what I've been thinking these last couple of weeks.
Keep posting stuff like this. Good find!
Regards,
John
How quickly we are switching from an inflationary scenario to a deflationary one. These swings are driving me nuts...
Almost bought some LB zeroes at 5.30 yield but was holding out for 5 and a half. Kicking myself now... I don't have a good handle on this market, so I'm out for now.
Things 'feel' soft.
Almost bought some LB zeroes at 5.30 yield but was holding out for 5 and a half. Kicking myself now... I don't have a good handle on this market, so I'm out for now.
Things 'feel' soft.
inflation is based on how corrupt the calculation is .....
if you factor in devaluation, you're getting killed by the loss of purchasing power.......
but it feels better in the great land of denial...no recession too large to monetize.....recession in the past was uselful to flush poor credits down the drain....forget that....that's hurts too much
for the life of me, I can't understand why the 10 year yield trades at a discount to real CPI regardless of the economic outlook
if you factor in devaluation, you're getting killed by the loss of purchasing power.......
but it feels better in the great land of denial...no recession too large to monetize.....recession in the past was uselful to flush poor credits down the drain....forget that....that's hurts too much
for the life of me, I can't understand why the 10 year yield trades at a discount to real CPI regardless of the economic outlook
Attachments
It'll get there soon enough.
The bear market is bonds is not over yet.
The bear market is bonds is not over yet.