And the 30 year ...
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Bond rally nearing an end?
- Thread starter gharghur2
- Start date
onlytronalso, nice charts, 4.65% 10-yr yield is also 61.8% fib from 2006 low to high.
Of course, it's broken it already.
4 5/8 should hold you'd think.
I think it's too early to tell how the fall in oil will affect the economy and that the bond market is putting all its eggs in the basket of less pass throughs. It's true that the fed seemed to be most concerned about high oil's possible pass through's, but that's because it's the feds job, in fact part of their policy, to focus and talk up any inflation risks. The other side of the coin, was that oil helped restrain the economy from growing too quickly the past year or so. Without the restraint of high oil, the economy could really take off at an unsustainable pace in the near future. The next few months data should provide some insight into how it will play out. Too early to commit one way or the other like the bond market seems to want to do.
Slowing housing could counter-balance the lower oil to some degree. But with long rates this low, are we really facing a housing crash like some would like to believe? In fact, with long rates this low, how much of a restraint is on this economy at all right now?
Of course, it's broken it already.
4 5/8 should hold you'd think.
I think it's too early to tell how the fall in oil will affect the economy and that the bond market is putting all its eggs in the basket of less pass throughs. It's true that the fed seemed to be most concerned about high oil's possible pass through's, but that's because it's the feds job, in fact part of their policy, to focus and talk up any inflation risks. The other side of the coin, was that oil helped restrain the economy from growing too quickly the past year or so. Without the restraint of high oil, the economy could really take off at an unsustainable pace in the near future. The next few months data should provide some insight into how it will play out. Too early to commit one way or the other like the bond market seems to want to do.
Slowing housing could counter-balance the lower oil to some degree. But with long rates this low, are we really facing a housing crash like some would like to believe? In fact, with long rates this low, how much of a restraint is on this economy at all right now?
All markets work toward the ultimate goal.
Stocks continue in a bull market, which supports GDP growth at a reasonable rate.
Commodities and Crude have not confirmed a bear market yet, but this decline certainly appears like the beginning of one.
Long term rates have been rising for for several years in the 10yr, but only a little over a year in the 30yr. They look like they are in a bull market.
Money supply has been growing at a much slower rate over the past year. Less funds for banks to lend to small businesses = growth.
Based upon these charts. I would interpet all it this way. Crude will bounce back, with Commodities, even if it is a bear market (retracement). Demanding an inflation premium in bonds again. The FED in turn will raise rates one more time to fight this perceived inflation (Lakey will get more convincing). Bonds will make a new high in yield and then settle down for some time, as the FED again stops and commodities tank. The economy will slow but hold sway and level off at historical norms, and the bull market in stocks will continue.
Stocks continue in a bull market, which supports GDP growth at a reasonable rate.
Commodities and Crude have not confirmed a bear market yet, but this decline certainly appears like the beginning of one.
Long term rates have been rising for for several years in the 10yr, but only a little over a year in the 30yr. They look like they are in a bull market.
Money supply has been growing at a much slower rate over the past year. Less funds for banks to lend to small businesses = growth.
Based upon these charts. I would interpet all it this way. Crude will bounce back, with Commodities, even if it is a bear market (retracement). Demanding an inflation premium in bonds again. The FED in turn will raise rates one more time to fight this perceived inflation (Lakey will get more convincing). Bonds will make a new high in yield and then settle down for some time, as the FED again stops and commodities tank. The economy will slow but hold sway and level off at historical norms, and the bull market in stocks will continue.
Quote from rjmain:
So because this yield curve is beyond screwed up, does anyone have any theories on whether the fed is going to come to the bond market or the bond market come to the fed by letting the yield curve normalize.
PS. I am one of those idiots who is short long bonds
I'm also one of those idiots.
I remain short the long bond on a structural basis, but I am really starting to question my analysis. Namely, if we aren't going to have another bout of deflation before further inflation. Housing issues are very deflationary at present. Palpable slowing in the economy. I expect easing - IMHO a rate hike will be avoided at present due to fears of a stock market decline. Future rate drops are very clearly priced into the yield curve.
I've hedged by legging into the short to intermediate end of the curve which I am planning to ride down for the next 9-15 months. I'll keep the short LB position as long as yields stay above 4.50% - below that I really think I will need to reexamine my position.
Still wish I had bought some zeroes at 5.30% Was holding out for 5 and a half. Greedy!
cant see how bonds are suppose to reflect economic prospects....since foreign banks dont have to mark-to-market all of the truckloads of treasury paper they buy, so why not use Treasuries to manipulate the currency market.... print Yen, buy US Bonds forever more
since foreign banks dont have to show losses, that makes the whole debt market pricing a farce......
an opinion of course.............
since foreign banks dont have to show losses, that makes the whole debt market pricing a farce......
an opinion of course.............
Speaking of the nations abroad, many people have posted comments concerning internal situations. However, in one respect, does it even matter? The foreign demand for American debt right now is so high and the proportion of debt held abroad is at an all time high. Thus, is the yield curve really capable of normalizing as much as it should? I suppose the only things that could reduce the foreign demand is a decrease in their domestic liquidity and/or an increase in the fears of dollar devaluation in the next few quarters, from the fed being finished with tightening. Please, share your thoughts, as I am questioning my analysis from earlier this year (short dollar and short long bonds as a hedge, betting on a widening in the spread between the two).
No Thank you. Do not even want to speculate that thought.
It just another 1987 waiting to happen.
It just another 1987 waiting to happen.
What THE HELL is going on in the bond market ? !
I am short some Dec TLT calls and they have doubled on me, thank god I saw a move coming and reduced the position on Monday
can someone explain what the convexity buyers exacty are and the relationship with mortgages ?
I am short some Dec TLT calls and they have doubled on me, thank god I saw a move coming and reduced the position on Monday
can someone explain what the convexity buyers exacty are and the relationship with mortgages ?
Quote from mcurto:
Massive mortgage call buying and convexity-type bid in cash 10s and futures. 2yr finally caught up this afternoon on the rally and steepened the curve quite a bit. I think the mortgages are moving into March options as Dec is becoming more influenced by volatility as it gets closer to front month. They bought nearly 35,000 March 109 calls outright for Countrywide while Wells Fargo rolled calls from Dec 108 and 109 into the March 109 and 110. Flows will take over below this 4.65% yield in cash 10s, because the move to 5.25% started here, so convexity buyers will get dragged in and maybe take us another 5-10 basis points lower in yield.