Bond rally nearing an end?
- Thread starter gharghur2
- Start date
might be a BIG trade ...
So the bonds having been looking at an easing basically since just after the june FOMC 1/4pt hike.
So what now? Is the yield curve goin' to normalize?
On the 30 year, 110-111 was a consolidation area back in March and again for most of September. SO do we chop around here for a while or is it straight to 5% yields?
usually I can form my own opinion but a position going against me is f&*king with my objectivity.
The yield gapped up yesterday so a drop back to 4.83 to fill that would bring the dec bonds up to about mid 111's but the way this market is looking I don't know what could trigger a 3/4 point rally.
For inflation info - There's a 10yr tips auction tommorrow and PPI & CPI next week. They are going to have to come in real cool to re-ignite this rally.
So what now? Is the yield curve goin' to normalize?
On the 30 year, 110-111 was a consolidation area back in March and again for most of September. SO do we chop around here for a while or is it straight to 5% yields?
usually I can form my own opinion but a position going against me is f&*king with my objectivity.
The yield gapped up yesterday so a drop back to 4.83 to fill that would bring the dec bonds up to about mid 111's but the way this market is looking I don't know what could trigger a 3/4 point rally.
For inflation info - There's a 10yr tips auction tommorrow and PPI & CPI next week. They are going to have to come in real cool to re-ignite this rally.
Might be useful looking at say a 5yr TIPS (generally the maturity used to ultimately gauge effectiveness of Fed policy) chart to see market expectations for inflation heading into CPI and PPI next week. I will try to attach the chart below, but the jist of the story is that breakeven rates over Treasuries have plummeted the past several months as inflation hasn't seemingly slowed (at least the PCE preferred method for the Fed isn't slowing). The question to ask is are market expectations for inflation way too soft (most likely based on falling energy prices) or is inflation actually broad-based? It makes me think TIPS are cheap into next week and the Nov 106 puts in the 10yr (bought a few for 2 ticks this morning) were cheap until this afternoon, still somewhat cheap. Or if you think the market is right and way too much inflation is priced in outright Treasuries now then maybe the Nov 109 calls are a good shot in the dark.
Il Principe
Guest
Not much to support a significant rally:
1.) Fed Govs. the last 8-10 days talking negative on inflation
2.) Worldwide CB's bumping higher: Eurozone last week; India,
good chance; Japan, possibly; China, during the summer.
3.) The belief, and subsequent rally last week, that we
would lower rates was way out of line, bordering on absurd.
4.) Commercial real estate/construction picking up where resi-
dential dropped off.
5.) COT for Treasuries last week: lotsa longs.
Only support I see are the NK/Iran issues.
That being said, we broke quite alot the last few trading days, so 10-12 ticks may come back in your favor. And so you know, I'm not a position trader, so I'm not trying to put lipstick on a sweet-looking short. I'm indifferent to the direction of a move.
1.) Fed Govs. the last 8-10 days talking negative on inflation
2.) Worldwide CB's bumping higher: Eurozone last week; India,
good chance; Japan, possibly; China, during the summer.
3.) The belief, and subsequent rally last week, that we
would lower rates was way out of line, bordering on absurd.
4.) Commercial real estate/construction picking up where resi-
dential dropped off.
5.) COT for Treasuries last week: lotsa longs.
Only support I see are the NK/Iran issues.
That being said, we broke quite alot the last few trading days, so 10-12 ticks may come back in your favor. And so you know, I'm not a position trader, so I'm not trying to put lipstick on a sweet-looking short. I'm indifferent to the direction of a move.
after listening to GW's new conference today, it is clear that no one is in charge of anything...the US is adrift...unable to respond to NK's provacation, allowing Chavez and ak-ma-din-a-jihad to come here and trash the US with no response, the Dems wil take over the House..... Iraq and Afghanistan are basket cases.....
I'm so depressed I bought some gold tonite..........
I'm so depressed I bought some gold tonite..........
L
Lance Carson
The bullish gap up to 111-15 ( 48.50 yield) WILL BE FILLED. COUNT ON THAT.
Lance, a 7-7-06 gap on the dec contract didn't get filled according to my charts. is that because it wasn't the current front month traded at the time i.e. less volume ?
just curious.
just curious.
And the Beige Book today, put the last nail in that 'rate reduction' coffin. New lows on the horizon ...