The bubble in Treasuries looks ready to pop, sending prices on government debt sharply lower. But just about every other corner of the bond market beckons.
1/3/2009
In any great organization it is far, far safer to be wrong with the majority than to be right alone. —John Kenneth Galbraith
Asian currencies continue to sell off vs the $ on the heels of the news yesterday that South Korea said they will look into hot money inflows stemming from the $ carry trade and the Bank of Indonesia said they are looking into the foreign buying of bills. This follows the news a few weeks ago that Taiwan was limiting foreign deposit holdings and Brazil was taxing foreign inflow transactions. As I mentioned yesterday, we may have reached a short term pain threshold in terms of $ weakness and foreign countries are fighting back as they certainly won't wait for...
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January 4th, 2009 at 11:12 am
So many reasons to sell… better deals in investment grade, extremely high yields in a variety of distressed debt vehicles, and a mountain of supply on the way. Disclosure: I am short the 10-year and will remain so until there is some indication that the federal deficit is under control. Could be a while..
January 4th, 2009 at 11:57 am
I second leftback’s statements. The best trade in town are the ultrashort Treasury Bond ETFs… like TBT.
January 4th, 2009 at 12:17 pm
lb,
looks like your motion will carry, as it should~
seems the 10 & 30-years(UST variants) are starting to unwind the recent spike, looks like the ‘magnetic’ effect of the 50-day m.a. is reasserting its pull..
be interesting to see if we get a bounce off that thing( the 50 m.a.), or we crash right through it–either way, it’ll set the stage for, at least, 1Q ‘009..
btw, way to keep thinking..
January 4th, 2009 at 12:26 pm
Mark: I never stop thinking: “what if..?”
January 4th, 2009 at 2:21 pm
If bond prices fall, will money managers have to “rebalance” away from equities every month-end?
January 4th, 2009 at 3:06 pm
Also, folks, remember Bernanke’s 2002 speech? Doesn’t he say he can purchase Treasuries in order to keep the yields low, as was supposedly done in the 1950’s? Won’t that hurt TBT investors?
January 4th, 2009 at 4:35 pm
lb,
at the “Don’t Leave until You’re ready to Go~”-School, “What If?” is inscribed over the Exit Door..
IOW, it’s Fundamental, to keeping one around, to be around..
or, differently, that’s the First Arrow to have in your Quiver..
; -
~~
wunsa-
after a Fashion, the More he Buys, the More Sellers he’ll attract..
Macroeconomically, at the very minimum, this isn’t the ’50’s, anymore..
January 4th, 2009 at 8:25 pm
Thanks, Mark.
January 4th, 2009 at 9:24 pm
wunsa-,
no prob, though, remember, mine is, merely, a singular opinion. lb, for instance, probably takes a different path to reach his, long TBT, conclusion..
w/that–lb, and wunsa-, had you seen this, from last week?
By Rebecca Christie and Liz Capo McCormick
Dec. 31 (Bloomberg) — Bond dealers and hedge funds that fail to complete trades in Treasury securities face a penalty of as much as 3 percent on the proceeds of transactions, according to a Federal Reserve-backed industry code to be implemented in the next six months.
The plan, which strengthens official oversight of trading, will be unveiled as soon as Jan. 5, said Thomas Wipf, chairman of the Treasury Market Practices Group and the head of institutional securities group financing at Morgan Stanley in New York.
“It seems quite obvious that the Fed and Treasury cannot and will not accept the status quo for much longer,” Wipf said in an interview.
Demand for Treasuries is so great that investors are lending cash for next to nothing to obtain the securities as collateral through repurchase agreements, or so-called repos. The problem is market participants haven’t always delivered the bonds, causing “fails” to exceed $5 trillion at their peak, according to the New York Fed.
http://www.bloomberg.com/apps/news?pid=20601087&refer=worldwide&sid=aJQOEPb4pCYg