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Bonds readying to advance?
- Thread starter gharghur2
- Start date
Your comments about inflation and the yield curve are in line with what Greenspan said in his July 20, 2005 testimony -- an important roadmap for bonds:Quote from landboy:
Defintiely agree on the capacity question, the economy in general remains strong... But from standpoint in long rates, which are more sensitive to inflation and less to the fed, I have reversed my opinion on where I think pricing pressures are post-Katrina...
I think we agree on one thing though, they're definitely going two more, to 4.75, and not the truly optimistic 4.5 as some would like it. However, I think the street has mostly priced in a 4.75 FF, and yet we are still hovering at 4.5 in the ten year, which is my justification for continuing to push long...
The most memorable quote I"ve heard in the last two months is "If we go inverted, chances are we will go VERY inverted" meaning I don't think there will be much of a bounce, the lack of a true rally in the last two months has already been resistence from inversion, if we get a sign that it's ok, let the flood gates open.
<i>Some, but not all, of the decade-long trend decline in that forward yield can be ascribed to expectations of lower inflation, a reduced risk premium resulting from less inflation volatility, and a smaller real term premium that seems due to a moderation of the business cycle over the past few decades.This decline in inflation expectations and risk premiums is a signal development. As I noted in my testimony before this Committee in February, the effective productive capacity of the global economy has substantially increased, in part because of the breakup of the Soviet Union and the integration of China and India into the global marketplace. And this increase in capacity, in turn, has doubtless contributed to expectations of lower inflation and lower inflation-risk premiums.</i>
<i>In addition to these factors, the trend reduction worldwide in long-term yields surely reflects an excess of intended saving over intended investment. This configuration is equivalent to an excess of the supply of funds relative to the demand for investment. What is unclear is whether the excess is due to a glut of saving or a shortfall of investment. Because intended capital investment is to some extent driven by forces independent of those governing intended saving, the gap between intended saving and investment can be quite wide and variable. It is real interest rates that bring actual capital investment worldwide and its means of financing, global saving, into equality. We can directly observe only the actual flows, not the saving and investment tendencies. Nonetheless, as best we can judge, both high levels of intended saving and low levels of intended investment have combined to lower real long-term interest rates over the past decade. </i>
http://www.federalreserve.gov/boarddocs/hh/2005/july/testimony.htm
Quote from steveosborne:
Your comments about inflation and the yield curve are in line with what Greenspan said in his July 20, 2005 testimony -- an important roadmap for bonds:
<i>Some, but not all, of the decade-long trend decline in that forward yield can be ascribed to expectations of lower inflation, a reduced risk premium resulting from less inflation volatility, and a smaller real term premium that seems due to a moderation of the business cycle over the past few decades.This decline in inflation expectations and risk premiums is a signal development. As I noted in my testimony before this Committee in February, the effective productive capacity of the global economy has substantially increased, in part because of the breakup of the Soviet Union and the integration of China and India into the global marketplace. And this increase in capacity, in turn, has doubtless contributed to expectations of lower inflation and lower inflation-risk premiums.</i>
<i>In addition to these factors, the trend reduction worldwide in long-term yields surely reflects an excess of intended saving over intended investment. This configuration is equivalent to an excess of the supply of funds relative to the demand for investment. What is unclear is whether the excess is due to a glut of saving or a shortfall of investment. Because intended capital investment is to some extent driven by forces independent of those governing intended saving, the gap between intended saving and investment can be quite wide and variable. It is real interest rates that bring actual capital investment worldwide and its means of financing, global saving, into equality. We can directly observe only the actual flows, not the saving and investment tendencies. Nonetheless, as best we can judge, both high levels of intended saving and low levels of intended investment have combined to lower real long-term interest rates over the past decade. </i>
http://www.federalreserve.gov/boarddocs/hh/2005/july/testimony.htm
Thanks for that... What do you think of the Consumer Confidence number on Wed? I don't live inthe states so wasn't able to hit up the malls there this season, but here it's been pretty "whatever..."
I don't have much interest for the Consumer Confidence Index but I pay attention to "live" indices you can find in music, movies, commercials and yes, malls also. A simple example of what I mean would be the monster.com commercials:Quote from landboy:
Thanks for that... What do you think of the Consumer Confidence number on Wed? I don't live inthe states so wasn't able to hit up the malls there this season, but here it's been pretty "whatever..."
- 6 years ago their commercials were telling you to quit your job and then find a better one among all the great jobs waiting for you;
- 3 years ago the commercials completely changed with sadden job seekers counting on monster.com to help them;
- Now, the tone is more upbeat but people are still <i>thankful</i> for being hired because employers still have the upper hand.
Quote from steveosborne:
I don't have much interest for the Consumer Confidence Index but I pay attention to "live" indices you can find in music, movies, commercials and yes, malls also. A simple example of what I mean would be the monster.com commercials:
- 6 years ago their commercials were telling you to quit your job and then find a better one among all the great jobs waiting for you;
- 3 years ago the commercials completely changed with sadden job seekers counting on monster.com to help them;
- Now, the tone is more upbeat but people are still <i>thankful</i> for being hired because employers still have the upper hand.
YES! I've heard psychs using hollywood fashion to gauge sentiment as well... very interesting..
But you don't have to be a psychologist to derive the assumptions behind mass communication strategies! Also, information derived from entertainment and marketing media is not immediately discounted into prices by the big number crunchers, which gives you an edge.Quote from landboy:
YES! I've heard psychs using hollywood fashion to gauge sentiment as well... very interesting..
Good for you!
I watched till 2PM then went and did something else.
I noticed a diagonal triangle form in stocks this morning, and they got slammed as expected.
Bonds look like they are completing a third wave, may test that 115.13 pivot before pulling back here.
I watched till 2PM then went and did something else.
I noticed a diagonal triangle form in stocks this morning, and they got slammed as expected.
Bonds look like they are completing a third wave, may test that 115.13 pivot before pulling back here.