Is this the beginning of the big bond market dummy spit?
Treasuries don't look good. The potential for a bond market sell off is just huge at the moment. ALL of the good news is in.... are we there yet? Starting to look that way.
Paris ib 15:45:10 GMT - 10/06/2016
I take it the view on the street is a bond dummy spit will be USD supportive because... well just because. Because a major sell off in a major financial market is just gonna suck in all this new foreign capital or something... foreign capital being attracted to markets which are taking a major hit. We're going with THAT narrative for the moment. You gotta laugh. Dislocation in debt markets - if that's what we get - will have a huge impact on the economy.
Paris ib 16:02:48 GMT - 10/06/2016
Looks like the Saudis aren't taking any chances. U.S. Treasury holdings down from 123 billion in January to 97 billion in July (latest data). It will be interesting to see what happened after that and after the recent vote in the U.S. Senate. :-)
And the Bond Market Dummy Spit continues. 3 year U.S. Treasury yield breaks 1 percent, 2 year yields at close to 0.9 percent. That's where it's gonna hurt. Rolling massive amounts of debt at higher yields.
"the weighted average maturity of the Treasuryís marketable debt outstanding... (is) 70 months by the end of June" according to the WSJ.
You don't want to worry about the USD, you don't want to worry about Stocks but when it comes to the U.S. Treasury market BE very afraid. And be very, very afraid of the consequences.
3 year Treasury yield now above 1 percent. Going, going.....
Paris ib 12:28:54 GMT - 10/28/2016
And the spit continues. You might have noticed.
Paris ib 16:35:23 GMT - 11/08/2016
A Clinton Presidency will see a bond market dummy spit resume? What gives with this? If we get enough bond selling stocks will follow.
Paris ib 18:33:44 GMT - 11/09/2016
This move today in U.S. Treasuries is absolutely serious. Nothing else really matters. The U.S. can not afford to refinance its massive debt (4 trillion of which expires and is rolled over every year) and significantly higher interest rates. This interim Government thing with a political unknown in charge will be very difficult to navigate.
NOT I suggest ultimately positive for the USD or stocks in the medium term. And by medium term we are talking next month or so.
Paris ib 20:45:33 GMT - 11/10/2016
The U.S. Treasury market is telling us something and we better pay attention. A higher cost of borrowing makes a big difference to the distribution of wealth and economic growth. This looks very much like a big turn. We keep going with this and everyone will have to sit down and re-do their calculations. At risk: those who have borrowed short term at low interest and have large debts and insufficient income. That goes for countries and people. And right now large debts are everywhere. Some creditors will not get their money back. Some borrowers will be foreclosed upon. A big splat. Currency implications.... not as easy as they seem. We are not dealing with rising overnight or very short term rates we are talking about a bond market SELL OFF. That is money EXITING bonds.
Mtl JP 20:58:09 GMT - 11/10/2016
ib 20:45 that sounds like a mother of a trade and an opportunity - if "we are talking about a bond market SELL OFF. That is money EXITING bonds" is correct - to get filthy rich
BUT consider the after of "The 10-yr yield at current levels will force the Fed to tighten policy."
nw kw 21:01:01 GMT - 11/10/2016
Fed to tighten policy but trump to spend? fant?
Paris ib 21:05:34 GMT - 11/10/2016
JP you are assuming that the authorities can save the bond market. I'm not sure that can be done. It is gonna be an interesting year.
nw kw 21:15:33 GMT - 11/10/2016
soft mxn and cad/shifts to usa oil in hot box. ap 3 month swings.
Paris ib 21:17:34 GMT - 11/10/2016
All those dumb arses who went around scaring everyone to death (in order to force voters to vote for Nurse Ratched - and that worked NOT) are gonna have to find a way to calm things down. They let the world believe that the U.S. was at risk under a President Trump - as were all the significant foreign relations of the U.S. (with the exception of course of Russia). So now we have a bond market scare. Very bloody clever. These 'progressive' over educated morons need to be fenced in. They are a danger to themselves and everyone else. What they gonna do now? These fools.
nw kw 21:23:06 GMT - 11/10/2016
interesting its like spring hear in cad ngas missed priced, firm ussr so em market looks supported, risk on.
Mtl JP 21:23:07 GMT - 11/10/2016
ib 21:05 for the record: Mtl JP 11:43 GMT July 28, 2016 - one fine day in the future those 10-yr bonds are going to cause a lot of pain
so far I have not yet made out like a bandit on the 10-yr
Israel Dil 21:24:27 GMT - 11/10/2016
some would say that being in a position to blame Arab monarchs in crash of the bond market is a gift. betting on fiscal crash in Arab oil monarchies is sort of safe bet. those monarchs to feel as Trump disrespects then and in return they going to make 'bonds flood'. possible?
Paris ib 21:24:42 GMT - 11/10/2016
We live in very peculiar times JP. You may have noticed.
Paris ib 21:25:55 GMT - 11/10/2016
Dil I don't know where this is coming from. China? Saudi Arabia? Could be anything. What you don't want is a rush to the exits because then there will be no bids.
Paris ib 21:28:15 GMT - 11/10/2016
Bond market tanks. Trump may have to rethink his funding options. At least we got the right man for the job there.
nw kw 21:31:05 GMT - 11/10/2016
free trade open from 1980s so hang on?
Mtl JP 21:43:08 GMT - 11/10/2016
ib 21:24 oh yes I have noticed...
"Shares of Fannie are up about 41% since Tuesday, and Freddie shares have risen about 46% in that time." darn ! and that without me.
Earlier I posted a link to https://www.greatagain.gov
Here is just a small subsection of opportunities:
A Trump Administration would execute on the following ten-point plan to restore integrity to our immigration system, protect our communities, and put America first:
It doesn't matter who is selling out of Treasurys until you know WHY they are selling - and who is on the other side of the sale // two things to consider for the US economy are Velocity and inflation expectations - money is like water, moving water and moving money can make things happen - low or negative interest rates creates hoarding so money is just stagnant water; as rates rise the money will move, velocity will increase
the inflation expectations need to be judged on a very short term basis (not y/y but q/q) because expectations accelerate faster than the actual y/y inflation rate -- it won't take much w/ rates so low to drive the REAL YIELD further into negative territory (IMO this is what's happening in Treasurys) // the Fed is the REASON 10 yr yields are so low (BERNANKE's buying) so when Bullard distorts cause and effect based on the 10 yr he should acknowledge the effect of Fed hoarding
Once the money starts to move you will see an entirely different economy -- I think the Pres elect may have a Hotel where an accord restraining a STRONGER USD can be agreed in a few years
Paris ib 07:58:02 GMT - 11/11/2016
Bond markets closed today. So that's it: outside week down in Treasuries. Medium term bear market signal. Pinch of salt given the events this week, or not? We will see.
Paris ib 15:07:14 GMT - 11/14/2016
I haven't really looked into this 1 trillion USDs which the Donald is planning to spend to do what? Rebuild U.S. infrastructure? Military capacity? I don't know the details or even how likely or how soon this is likely to happen. The bond market though is not liking it. First, I would guess, because of the huge funding requirement this implies and second, because of the likely inflationary impact. A double whammy for bonds at a time when 4 trillion in U.S. Treasuries expire every year. 3 years travelling around 1.3 percent already from a low of 0.25 percent end 2012 or there abouts.
Does anyone have any details? I know this is all hypothetical at the moment but the market is taking him at his word.
all hypothetical at the moment. rotation in past took place with bonds at highs stocks lower. not really the case here. stocks are highly valued. fiscal spending should massage some p/e ratios but not all. so itll be selective, if we get the spending. also not sure mkt can cope with rates at 2.7/3% at back of this yr as that what will happen on a 2.38 break. u will have seen nothing in comparison to a proper break of the last high.
Paris ib 15:18:16 GMT - 11/14/2016
red I know it's all hypothetical. Stocks are pretty high and Bonds, if you take a longer term view, are actually in the stratosphere. I mean negative yields? That's nuts. German yields were negative all the way out to 10 years not so long ago. Bond yields don't need much encouragement to start rising hard. And they have been. Stocks and the economy will be impacted as a result. This whole scenario (in financial markets, in politics and on the international scene - with all the wars currently underway) is unprecedented. There is no road map. Personally I think the chances of a major shake up are right up there.
The implications on currency markets is less clear.
Paris ib 15:20:06 GMT - 11/14/2016
The default position used to be: during financial market chaos buy USD - the international reserve currency. This time round it might be different.
london red 15:21:43 GMT - 11/14/2016
for now yield spreads are supportive of usd. in a rout maybe it wud change but where do u go TINA as usual.
Paris ib 15:23:09 GMT - 11/14/2016
Yeah red in this initial phase we go with this. I agree. This sure is going to be interesting though in the medium term.
At what point do higher funding costs becomes a real concern for economic growth and government funding programmes. Double digits would be a big problem. Can we do 5 percent on the 30 year without too many issues? Don't know. There must be a back of th envelope calculation out there somewhere.
GVI Trading john bland 19:14:29 GMT - 11/17/2016
ib- good question. Answer is I don't know. All I can say is that something like 5.00% looked to be very cheap to me at one point. Now I no longer think that is the case.
Paris ib 19:19:58 GMT - 11/17/2016
Ain't that the truth John. Now you think 5 percent? You must be kidding. 25 year fixed rate mortgages are now available in France at... wait for it: 1.25 percent FIXED. Seriously. So the bank margin is what? I don't know. Not much I would assume. A five percent mortgage looks like a rip off. Not so long ago it would have been a very good deal. And we are all now used to this. Even though during the GFC - which was not during the Dark Ages - mortgage rates spiked higher.
Don't know who is swimming naked but we are about to find out. Creative thinking is recommended.
Saw a nice piece on what Trump represents. And it's not what you think.
Any increase in interest rates is probably going to be felt the most severe among mortgage holders in Australia whether they be investors or owner-occupiers.
1. Rents in Melbourne and Sydney have recently been falling.
2. Wages have been increasing at the lowest on record.
3. The average mortgage in Sydney is AUD 550,000,
4. Average weekly take home earnings in May was AUD 1,575.
A 50 basis points increase in interest rates based on the average mortgage equates to AUD 27,500 while a 2% increase to the average wage is AUD 1,638.00.
Sydney and Melbourne property prices have increased by around 50% over the last three years.
As Frank Sinatra once said "Somethings Gotta Give" and that's probably AUD/USD.
Paris ib 19:28:23 GMT - 11/17/2016
ACC yeah and the Sydney and Melbourne property market follow the AUD down. Which will make life very tricky for local banks.
No end in sight. Bonds keep getting sold. That small exit door again.
PAR08:48:05 GMT - 11/18/2016
Draghi seems not to have noticed that the world has changed since the US elections .
Negative interest rates make no sense in this new environment .
Paris ib 08:51:51 GMT - 11/18/2016
Don't worry PAR there will be no negative rates soon enough. German bond yields still negative out to 7 years. 30 year German bond yield at just under 1 percent. U.S. 30 year yield at 3 percent. All rising. And until yields STOP rising you don't buy bonds. These markets are in sell off mode. So currency implications are NOT clear even though - in the short term - the market is ignoring that fact. Won't last though. What you are seeing now is just speculative buying. Not real capital inflows.
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