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| User Info | 30y Bond Results: Beware in forum [Ticker] | |||
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Genesis Posts: 66463 Incept: 2007-06-26 
Royal Flush! 
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http://market-ticker.org/archives/1115-3....
---------- I used to play flute; I wonder if I can play a fife? I incite prosecutors to create "Bubba Sausage Parking Lot" projects Darrell Issa has a middle finger and knows how to use it - Me 2009-06-11 14:07:25
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Mondocondo Posts: 3071 Incept: 2007-12-03 
Miami
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"Remember, foreign central banks can FORCE a pull in liquidity and make their desires a self-fulfilling prophecy." Can you elaborate on this? If they pull in liquidity, doesn't that make interest rates go up, thereby decreasing the value of their bonds? 2009-06-11 14:13:15
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Tsberts Posts: 1746 Incept: 2008-02-05
Minnesota
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Foreign central banks can stop lending us money, while we spend what little cash we've got keeping insolvent banks afloat. Liquidity drained.
---------- Photoguy was an optimist. In Soviet Russia, the banks are run by the politicians. 2009-06-11 14:16:58
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Genesis Posts: 66463 Incept: 2007-06-26
Royal Flush!
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No, they can stop the deficit spending. Think about it. Printing makes the value of their bonds go through the floor. It ain't gonna happen. ---------- I used to play flute; I wonder if I can play a fife? I incite prosecutors to create "Bubba Sausage Parking Lot" projects Darrell Issa has a middle finger and knows how to use it - Me 2009-06-11 14:18:22
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Aliveh Posts: 2487 Incept: 2008-01-18
Los Angeles
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I wonder whether to interpret this (presumed) JCB trade as a short-term flip trade or a long-term hold-to-maturity trade. Either way the reasoning is similar. That means "they" don't think the next selloff is the "big one", i.e., expect another asset sell-down / flight to quality into treasuries. Or on a long-term basis they expect a 30-yr deflationary USD environment (and Jpn economic recovery / weaker JPY?) "They" still don't expect treasury yields to ramp on lower US credit quality or the US to default. So, treasury short, USD shorts, equity longs would get crushed. Is that the correct interpretation? 2009-06-11 14:19:57
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Genesis Posts: 66463 Incept: 2007-06-26
Royal Flush!
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Yep.
---------- I used to play flute; I wonder if I can play a fife? I incite prosecutors to create "Bubba Sausage Parking Lot" projects Darrell Issa has a middle finger and knows how to use it - Me 2009-06-11 14:21:31
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Fnord123 Posts: 28 Incept: 2009-03-30 Hillsboro, OR
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Err, now I'm confused (maybe I confuse easily). If the 3yr and 10yr rates shoot up, that's a bad sign because of the impact on mortgage rates as well as the risk of bond market dislocation. If the 30yr rates shoot down, that's a bad sign because of the risk of bond market disclocation. I'm likely missing something, because what I just wrote doesn't seem very reasonable. 2009-06-11 14:22:24
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Banditfist Posts: 272 Incept: 2007-09-20
Baltimore, Maryland
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Didn't Fed Gov Cohen testify to Congress that part of the expansion of the Fed's balance sheet (to more than $2.2 trillion) was made up of loans to not only banks, but to other central banks? Wouldn't the results of this auction give some evidence of the liquity drain that you were talking about last Friday, KD? ---------- "Are you sure you can't remember?" "I'm sure I can't remember" ~ Ben Bernake 25 Jun 2009 2009-06-11 14:22:57
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Mondocondo Posts: 3071 Incept: 2007-12-03
Miami
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Man this **** is complicated, but I think I get it now. They stop us from printing, fewer bonds need to be issued, supply of bonds goes down, so the value of existing bonds goes up. Is that it?
2009-06-11 14:23:38
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Tsberts Posts: 1746 Incept: 2008-02-05
Minnesota
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Quote:No, they can stop the deficit spending. Think about it. By "They" are you referring to our own administration? I agree, balancing spending to revenues fixes this problem, but I just can't see it happening. It's the last resort for our current leaders. Right after confiscation of all private property. ---------- Photoguy was an optimist. In Soviet Russia, the banks are run by the politicians. 2009-06-11 14:24:20
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Genesis Posts: 66463 Incept: 2007-06-26
Royal Flush!
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You stop the printing the DX goes up, bonds go up in price (down in yield) debt is forced to default and unwind and both equities and commods get smashed to dust. They MAY be about to execute on the correct thing to do that will clear the system - recognition may have finally occurred that the path they were on can't possibly work. If so, those who are on the wrong side of this are going to get destroyed, as these folks CAN make it happen. ---------- I used to play flute; I wonder if I can play a fife? I incite prosecutors to create "Bubba Sausage Parking Lot" projects Darrell Issa has a middle finger and knows how to use it - Me 2009-06-11 14:25:29
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Asimov Posts: 21232 Incept: 2007-08-26
east tennessee Online
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Other people HAVE to be seeing the same **** we are -- why is the reaction still so positive? Are we missing something? How much dumb money can there be in the bond market?
---------- It's justifiably immoral to try to deal in a moral fashion with an immoral entity. If you trade based on what other people say, you will lose money. Especially what I say. I won't be held responsible. Festina lente. 2009-06-11 14:28:19
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Ssg263 Posts: 94 Incept: 2009-01-07
NY
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WTF is going on today? We have the inflation trade in equities and the deflation trade in bonds. How convenient for Uncle Sam! 2009-06-11 14:29:19
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Parcontre Posts: 193 Incept: 2007-12-02
Fort Worth
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Yes, the Fed can trigger a flight to safety, and hence push up T-bond prices, by draining liquidity. But they can't restrict the impact of that liquidity drain to the stock markets. For that matter, the Fed really has no power to direct where the impact of their actions will be felt. The Fed is the quintessential loose cannon; it can put a fuse to the charge, but is incapable of taking aim. My point is that they can only trigger a flight to safety is they're willing to sacrifice their goal of establishing more "green shoots." I, for one, think that they have assigned themselves a mission impossible. There is only one sound solution, and that is to write off debts that cannot be paid and let the chips fall where they may. As I understand, the Fed has declared that it will do whatever it takes, and create as much money as necessary, to turn the markets around. And after yesterday's less than satisfactory auction, it would appear that the Fed was determined to make today's auction "successful." Everything I watch -- stocks, bonds, commodities, currencies -- were up all morning against the dollar, and almost moving in lockstep with one another. This suggests to me that the Fed provided a strong dollop of liquidity to ensure a successful auction. ---------- Wherever fate my vessel steers, that image never disappears. In times of joy and times of tears, her song still echoes in my ears. 2009-06-11 14:29:36
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Genesis Posts: 66463 Incept: 2007-06-26
Royal Flush!
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Its not dumb money in the bond market. If you believe there will be massive deflation you buy the **** out of the long end of the curve. Something CHANGED this morning Asi. You don't buy long bonds if you think printing is going to take place (or continue to take place); that's suicidal as the value change is "coupon change x duration" - you can literally lose half in a few months. Levered, you're dead in a day. The PDs are long Ts up to their necks. If the selloff continues they will ALL blow up. Every one of them. It ain't gonna happen. The only thesis that makes the buying logical is the belief that the values will INCREASE. That means the DX must rise and/or coupon must come down, and both require that the hyperinflationary thesis be WRONG. ---------- I used to play flute; I wonder if I can play a fife? I incite prosecutors to create "Bubba Sausage Parking Lot" projects Darrell Issa has a middle finger and knows how to use it - Me Last modified:
2009-06-11 14:32:10 by genesis
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Fnord123 Posts: 28 Incept: 2009-03-30 Hillsboro, OR
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What about the thesis that the bond market buyers (however misguidedly) believe that we are in for a gradual, non-hyperinflationary, non-deflationary recovery? Wouldn't that support 30yr bond successful auction @ 4.6%? 2009-06-11 14:37:37
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Asimov Posts: 21232 Incept: 2007-08-26
east tennessee Online
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Genesis: Oh ****. Here I thought my prediction of an almost failed auction was bad. I do believe this is actually worse. I have to put on the shiny hat though and ask -- what if nothing changed, but there's yet another point of manipulated numbers? Or even manipulated BUYING - which wouldn't be easy to discover. I think I like your thesis better though -- simplest explaination... Oh, and it's more pessimistic too. (BTW: The dumb money comment was sarcasm) ---------- It's justifiably immoral to try to deal in a moral fashion with an immoral entity. If you trade based on what other people say, you will lose money. Especially what I say. I won't be held responsible. Festina lente. 2009-06-11 14:38:11
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Eaglewwit Posts: 1458 Incept: 2007-11-30 SoCal
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With all the bull**** that has been going on, the only thing I know is to expect the unexpected.
---------- "Not even I imagined we would see trillions of dollars being created and given to the culprits as a means of allegedly "saving" the system. This is not mere Keynesianism; it is Keynesianism on steroids and crystal meth." 2009-06-11 14:38:35
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Marketman1012 Posts: 30 Incept: 2009-04-25 NY
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The thing though, is that if we see another huge deflation bust downward like last fall and rush into treasurys, then what happens next time we get the brief recovery. I mean when the bust happens, if they keep "stimulating" and printing, then can't the dollar destruction occur during the next recovery? During the next bust, our government's insolvency will really show, so that people may fear holding treasurys. So when the panic ends, can't it be a rush out of dollars? 2009-06-11 14:38:47
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Genesis Posts: 66463 Incept: 2007-06-26
Royal Flush!
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Fnord, no. Such a recovery requires modest dollar devaluation which would skull**** the buyers. Ain't happening. These guys just placed a big fat-ass deflation bet and they are the ones who can make it happen. Bet against that if you want, but the tape tells me what they intend, and they're the ones in front of the buttons. ---------- I used to play flute; I wonder if I can play a fife? I incite prosecutors to create "Bubba Sausage Parking Lot" projects Darrell Issa has a middle finger and knows how to use it - Me 2009-06-11 14:39:10
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Mondocondo Posts: 3071 Incept: 2007-12-03
Miami
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How does this happen overnight, after such poor results on the 10 year auction? Did all the PDs have a worldwide conference call with the foreign central banks, and they all decided on a course of action? How else could everybody conclude overnight that treasuries are now a good buy, 24 hours after concluding they weren't?
2009-06-11 14:40:19
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John117 Posts: 199 Incept: 2009-02-19 
NOVA
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Gen, you think Paul Volker is starting to get through to the Administration don't you? Old Mr. Spicket making a comeback?
---------- Now we face the danger which in the past has been most destructive to the human - plenty, comfort and ever increasing leisure. No dynamic people have ever survived these dangers. - John Steinbeck 2009-06-11 14:40:33
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Margincalltime Posts: 811 Incept: 2008-04-01
NJ
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Quote:PS: If this analysis is correct then we're in for some really NASTY trouble, quite soon. If you're short Ts, short dollars or long equities, your neck is in the guillotine. Better move before the blade falls! Any guess as to the "soon"? 2009-06-11 14:40:37
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Daveincsa Posts: 117 Incept: 2009-01-25 In the South
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I'm beginning to think that we are so intertwined with the rest of the world that it doesn't matter anymore. The can will be continually be kicked down the road and it doesn't matter of the means are legal or constitutional. The Powers that Be will do whatever it takes now to keep the system afloat. Sure there may be small casualties like Iceland. That's why Obama is out there talking Healthcare. It doesn't matter. Kick the cost to some other generation. Social Security and Medicare too. That's why no one's talking what should be happening. Massive spending cuts. I hope I'm wrong. 2009-06-11 14:42:32
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Eaglewwit Posts: 1458 Incept: 2007-11-30 SoCal
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It still is a small bet that they took. I am not willing to jump right into that thesis with that small amount. When I look at the other side of the coin there are equally good arguments. They want to avoid the collapse of pensions by reflating the equity market. Deflation will kill tax revenues and most municipalities. They know all this. It is a lose lose situation. Which loss do they take?
---------- "Not even I imagined we would see trillions of dollars being created and given to the culprits as a means of allegedly "saving" the system. This is not mere Keynesianism; it is Keynesianism on steroids and crystal meth." 2009-06-11 14:43:00
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