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US Long-dated Treasuries breaking support level?

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  • Tue, Apr 28, 2009 - 10:46pm

    #1
    Farmer Brown

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    US Long-dated Treasuries breaking support level?

I’ve been following the price on T-bills closely as I’m sure many are, and I wanted to get feedback on what looks like a breakthrough below a critical (200-day) support point:

http://stockcharts.com/charts/gallery.html?$USB

What do this site’s pros have to say about this?  Is it significant, or is it irrelevant since the line was crossed a few times recently with no resulting pattern emerging? 

  • Tue, Apr 28, 2009 - 10:47pm

    #2
    Peak Prosperity Admin

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    Re: US T-Bill breaking support level?

Sorry – the 200d line has not been crossed before – only now.  The recently crossed line was the 40-day average. 

  • Wed, Apr 29, 2009 - 12:17pm

    #3
    Peak Prosperity Admin

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    Re: US T-Bill breaking support level?

Whoa, 96 reads and not a single response?  My clarification in the 2nd post doesn’t make the original observation irrelevant – it makes it more relevant.  The 200 day moving average was crossed in the last two days.  This is the price of 30-year US Treasury bonds.  This means the yield curve, which others have written so much about, should be steepening, which has been said to be a sure sign of coming inflation.  Am I off on this, or is this real?  I also noticed the Treasury announced yet larger cash needs in the coming months, and if I remember correctly, they are projecting the need to sell $300 billion in bonds in the month of July, which would dwarf the previous record.  I am getting the feeling that a melt down (or melt-up rather) in bond yields is very near.

  • Wed, Apr 29, 2009 - 12:40pm

    #4
    Peak Prosperity Admin

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    Re: US T-Bond breaking support level?

Patrick,

I skipped over reading this because I thought someone was posting a humorous topic …the notion of the T-Bill breaking support is laughable because it’s yielding zippo and has for a long while…breaking "support" would involve a move of a few basis points.

Now that I’ve wandered over here and see that you are commenting on the T-Bond I am not yet sure how to interpret your observation on breaking the 200 day.  The reason is that the Fed is now an active participant in this market and, as such, can push these prices wherever they want.

In times past, when the bond market was an actual market, I would have put more weight on the 200 dma break.  But now?  Not so much.

I will also note that every single bill and bond auction in April has been more than 2x subscribed with foreign central banks sucking up more than a third of each auction.  This tells me that the central banks are still holding hands in a big circle singing kumbayah buying each other’s debt as they attempt to reflate the whole world with their collective printing presses.

In this environment I do not know how to interpret formerly reliable chart patterns.

Thoughts?

Chris

  • Wed, Apr 29, 2009 - 12:40pm

    #5
    Peak Prosperity Admin

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    Re: US T-Bill breaking support level?

Patrick,

I may be 50 of those reads because while I am not educated enough to answer the question, I share it and was hoping for a sound reply or two.

Ultimately I think the Fed will simply print and buy debt as a form of QE and manipulate the bond market where they want it to be. Since we really have no way of knowing what the Fed is doing in detail, and we do not know the actual buyers of the bonds, they can do whatever they want. Also, if they print and buy bonds to fund things like government operations, infrastructure improvements, etc. vs. bailing out banks where the money stays locked up out of circulation, it seems like a fast track to inflation even if the bond price stays somewhat flat.

Recent noise from China as well as reports of bond traffic suggest China is getting out of Treasuries at a slow but methodical pace. Others are too. Not just not buying, but also cashing out instead of rolling the debt over. For the USGov to continue the farce, I see no option other than for the fed to directly monetize the debt. It seems OK now, but once inflation starts, game over.

Sound right?

Rog

  • Wed, Apr 29, 2009 - 12:44pm

    #6
    Peak Prosperity Admin

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    Re: US T-Bill breaking support level?

I wish I had the benefit of reading Dr. Martenson’s post before mine, as it appears we posted simultaneously.

He says it far more plainly than I do, the whole thing is no longer a market, but is being directed by central banks.

Rog

  • Wed, Apr 29, 2009 - 12:49pm

    #7
    Peak Prosperity Admin

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    Re: US T-Bill breaking support level?

I had read recently that T-Bills were still a good investment, as opposed to T-Bonds. (The former being short-term, the longer being long-term, if I understand it all correctly.) "Good" in the sense of protecting against further drops in the equities market.

Is all this to say, Stay away from any Federal investments now? 

  • Wed, Apr 29, 2009 - 12:50pm

    #8
    Peak Prosperity Admin

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    Re: US T-Bill breaking support level?

Thanks Chris and Ready,

That all makes sense.  I still get some feeling that their (Fed and kumbaya-hand-holding central banks) efforts are not panning out completely as they’d like, or the price would not be coming down as much.  Who the heck knows anymore.  Anyway, thanks much for your perspectives.

  • Wed, Apr 29, 2009 - 12:54pm

    #9
    Peak Prosperity Admin

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    Re: US T-Bond breaking support level?

[quote=cmartenson]

I will also note that every single bill and bond auction in April has been more than 2x subscribed with foreign central banks sucking up more than a third of each auction.  This tells me that the central banks are still holding hands in a big circle singing kumbayah buying each other’s debt as they attempt to reflate the whole world with their collective printing presses.

[/quote]

 

Kinda like everyone is staying on the Titanic because it is unsinkable.

If nations are doing this with currencies, possibly involved in other financial vehicles (e.g. gold, etc.)

So, envision what happens when the tipping point is reached?  Worldwide event?

 

Nichoman

  • Wed, Apr 29, 2009 - 12:58pm

    #10
    Peak Prosperity Admin

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    Re: US T-Bill breaking support level?

[quote=tx_floods]

I had read recently that T-Bills were still a good investment, as opposed to T-Bonds. (The former being short-term, the longer being long-term, if I understand it all correctly.) "Good" in the sense of protecting against further drops in the equities market.

Is all this to say, Stay away from any Federal investments now? 

[/quote]

Personally I would not be making any monitary investments unless you are ready for no oil. While YMMV, I have put my capitol into land, alternative energy, food, gold, etc. as a form of insulation from what may happen. It makes me feel far better than having that cash locked up in a piece of paper that may or may not be worth something in the future.

Just MHO.

Rog

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