US Long-dated Treasuries breaking support level?

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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? 

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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. 

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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.

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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

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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

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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

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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? 

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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.

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Re: US T-Bond breaking support level?
cmartenson wrote:

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.

 

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

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Re: US T-Bill breaking support level?
tx_floods wrote:

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? 

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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Re: US T-Bill breaking support level?

I was watching today's 7 year auction to see if the pattern would hold.  It hit the "1/3rd rule" to a tee. 

1:05 [UST2YR] Treasury sells 7-yr notes at 2.630%

1:05 [UST2YR] Indirect bidders take 33% of 7-year sale

"Indirect bidders" means "central banks" and they gobbled up exactly 33% of this offering.  I wonder if that's some sort of an agreed upon target?

 

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Re: US T-Bill breaking support level?

Here's an interesting take on the TLT action from Seeking Alpha: (the full article can be read here: http://seekingalpha.com/article/133452-what-long-term-bonds-and-shanghai-indexes-are-telling-us  )

 

Long Term Bonds/Treasuries



So, with the necessary introductions out of the way, let's check out a few charts. Kevin has been discovering some great patterns lately, and let's first look at the long term bond (treasuries) chart (TLT).

Click to enlarge:

As you'll see, there have been two distinct trading ranges in TLT over the past few months. Kevin argues that these consolidations often break out to the upside, as evidenced from the first trading range from September to December. TLT consolidated before breaking out to the upside. And, a similar multi-month consolidation has been occurring in the name. With the 200 day moving average acting as support, you could very well see a similar scenario play out. Last September, TLT hovered around that moving average and consolidated around support. This time around, however, things are much more dangerously close to breaking down. If TLT breaks through that 200 day moving average, things could get ugly.

Inverse correlation



We also want to touch on the correlation between the long term bond (treasuries) chart of TLT and the stock market in general (SPY). TLT and SPY have a loosely inverse relationship due to the 'flight to safety' status TLT has as an investment vehicle. When investors seek refuge from risk, they flock to vehicles like TLT. So, that massive breakout you see on the TLT chart in November/December coincides with the massive drop we saw in equity markets. When SPY tanks, TLT cranks up.



So, if you were to apply this relationship to the current TLT chart, this could be quite worrisome. If TLT does indeed breakout to the upside after a long period of correlation, that could very well mean that a new leg down is coming in equity markets. However, should this consolidation breakdown below the moving average and support levels, then equities could see a further rally. Either way, the consolidation in long term bonds (treasuries) tells us that a big move is coming. The question is, in which direction? While we don't yet know the answer, the charts will tell all and it will eventually reveal itself. One thing's for certain though: whatever TLT does, the equity markets will do the opposite. So, wait for a breakout in either direction of the trading range box. You can then play TLT long or short depending on the action, while playing SPY in the inverse direction of the action in TLT.

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Re: US T-Bill breaking support level?

I've posted before on the Treasury yields and posted when the 10yr broke and stayed above 3%. That was two days ago, I believe. Since then they have gone up even further. From what I had heard the Gov't/Fed was trying to keep them below 3%. When the Fed stated that they were starting to purchase treasuries...the yield on 10yrs fell to 2.51. That should tell us all something. Not good.

Particularly when mortgages start resetting.

 

Date 1 mo 3 mo 6 mo 1 yr 2 yr 3 yr 5 yr 7 yr 10 yr 20 yr 30 yr
04/30/09 0.04 0.14 0.29 0.49 0.91 1.38 2.02 2.70 3.16 4.10 4.05
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Re: US T-Bill breaking support level?

Chris et al:

Hang on a minute guys... I agree that in the face of manipulation, technical analysis patterns are less relevant. However, I think the "breakout" in the past few days is significant, not in terms of technical analysis but because of the Fed policy implications of the price action. (Either that, or I'm just not understanding what is going on, which is entirely possible).

When the fed announced its intention to purchase 300B of long-dated treasuries, it was widely speculated and reported that their goal was to contain long-bond yields at around 3.5 to 3.75% max. This was confirmed by the price action. The first announcement pushed yields down to about 3%, then they crept back up toward 3.5 and the Fed started buying and they were pushed back down. There were two or three rounds of this, and each time the yield approached 3.7% or so, the Fed started buying again. This seemed to be a Fed-induced yield cap, and for this reason I covered my short on the futures at 125, which is about a 3.75% yield. I figured that's as far as it was going to go before the Fed intervened to contain the yield.

But in the last few days, we've seen a breakout on the downside below the price (above the yield) where the Fed had previously begun to intervene. This makes me wonder whether the Fed has changed its strategy, which would be very significant. I'm also not clear on how much of that $300B has already been spent and how much is left, or even whether that information is public. Does anyone know?

Just a footnote, but I too missed this thread entirely because the title is misleading. Is it possible [for an Admin] to change the title of an existing thread? Surely this one would be more aptly named "US Long-dated Treasuries breaking support level?"

Erik

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Chris? Anybody? I'm baffled by what's NOT going on here...

I see that the thread name got changed. Thanks to whoever did that! :-)

I'm still baffled by the Fed's choice not to increase the initial $300B monetization with another round. Sure, there is the obvious explanation that monetization is reckless and never should have been resorted to in the first place, but somehow I don't think the Fed has gotten any more responsible with respect to creating additional inflation risk down the road.

Seems to me that the whole point of the 300B monetization was to keep mortgage interest rates low in the face of a coming onslaught of ALT-A rate resets. Those resets are just ramping up now, and will continue for several months. I was expecting the Fed to (recklessly in my opinion) do whatever it took to hold long bond rates below 4%, but that no longer seems to be their priority.

I don't get it. Anybody have a hypothesis for what's going on here?

Erik

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Re: US Long-dated Treasuries breaking support level?

Erik and others,

I believe the latest Contrary Investor report explains much.  Link to the report.

Here's the summary (this is a very important set of observations IMHO) which I have modified slightly by breaking long paragraphs into shorter ones and adding some emphasis:

We’ll keep the summary short because we’re sure you understand what is happening here.

As we see it, the BIG bottom line message is that the Fed is creating the impression or perception of healing in pockets of the US credit market. For those not willing to or literally unable to understand what is happening behind the scenes, many a headline credit market perception is actually a misperception when a light is actually shown on the facts of these various market segments.

Where the Fed is involved, the perception of healing or stabilization can be created. Where they are not involved (corporate markets), continued stress is still plainly visible. In the endgame, we believe credit market investors are smart. They are less emotional than equity investors. We believe many know exactly what is going on and the true character of supposed healing that has taken place with the Fed sticking all of its fingers in the US credit market dike that has cracked and has certainly not been repaired.

Alternatively, we believe equity investors caught up in the momentum of the moment need to keep a sharp eye on exactly what is happening in the credit markets. After all, the Fed/Treasury/Administration is compelling us to do so as they constantly focus on “unfreezing” the credit markets.

Absent the influence of the Fed, these markets are not yet recovering. Absent the Fed, the credit market patient is unable to get out of bed and walk on his/her own.

Let’s just hope equity investors have it dead right in their happy anticipation in recent months. For if what they are discounting is correct, especially in financial sector issues, the US credit markets should very soon be involved in a Lazarus event – an immediate rising from the dead.

But for now, it’s really the Fed holding up the credit markets, from which they cannot have a current exit plan by any stretch of the imagination. The credit markets ARE the issue for the current cycle. We need to keep this firmly in mind. We’ll be updating this analysis intermittently as we move through 2009.

The bottom line is that without the Fed shoveling money into the credit markets, they would have utterly imploded.  The Fed has destroyed its balance sheet and has no exit plan.  The equity markets are trying to game a usual & customary turnaround seemingly without discounting the possibility that this game is operating under a very different set of rules.  

In my opinion, those that are staking their future wealth upon the Keynesians "getting it right this time" are risking too much.  An enormous risk centers on the fact that the Fed has no exit strategy.  How could they?  They've bought nearly worthless assets from defunct companies.  There is no way to sell them back "at price" which is how the TOMO operations are designed to function.

For now I see a Fed that is simply living day-to-day with the "plan" consisting of buying time and hoping to figure a way out in the future.

To me it is unacceptable to have a single institution "play dice" with our collective future and I wish there was a way to vote on this by using something other than Federal Reserve Notes as my currency of choice.  For now, that role is filled by gold, land (soon), and other hard assets.

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Re: US Long-dated Treasuries breaking support level?

Wow!  Thanks for the clear message, Chris!  It is easy to forget that the economy's treading water on borrowed time (or would a better analogy be "doing a dead-man's float"?:),  when living day-to-day life.  This is a really good reminder not to squander what time has been bought, at taxpayers' expense, and to get our preparations in order!

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Re: US Long-dated Treasuries breaking support level?
pinecarr wrote:

Wow!  Thanks for the clear message, Chris!  It is easy to forget that the economy's treading water on borrowed time (or would a better analogy be "doing a dead-man's float"?:),  when living day-to-day life.  This is a really good reminder not to squander what time has been bought, at taxpayers' expense, and to get our preparations in order!

I was thinking the same thing.

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Re: US Long-dated Treasuries breaking support level?
Erik Townsend wrote:

I see that the thread name got changed. Thanks to whoever did that! :-)

I'm still baffled by the Fed's choice not to increase the initial $300B monetization with another round. Sure, there is the obvious explanation that monetization is reckless and never should have been resorted to in the first place, but somehow I don't think the Fed has gotten any more responsible with respect to creating additional inflation risk down the road.

Seems to me that the whole point of the 300B monetization was to keep mortgage interest rates low in the face of a coming onslaught of ALT-A rate resets. Those resets are just ramping up now, and will continue for several months. I was expecting the Fed to (recklessly in my opinion) do whatever it took to hold long bond rates below 4%, but that no longer seems to be their priority.

I don't get it. Anybody have a hypothesis for what's going on here?

Erik

Hi Eric,

The Financial Sense paper frames the situation well, but it does not answer the questions you've raised (which admitidley was not the point of the article).  That is, why are they removing one of those fingers from the dike at this very moment?  Surely they do not need to do that to test what would happen.  They must see the same things written about in the article above.

This is very interesting, and I will be watching every minute of it.  I get the feeling that regardless why they would do such a thing, they will soon stick that finger back in the dike and use their other hand to apply a compress as well.

I carried my short position on the long bond all week and got out Firday.  It was nice to finally get something out of it and it is nice to be able to have some way of profitting from what otherwise are bleak and perhaps apocalyptic economic times.

PS:  I'm a crappy headline writer.  Will try do to better next time!

 

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Re: US Long-dated Treasuries breaking support level?

I may be way off on this but it seems that the Fed will end up having to buy all the treasuries if they want to keep the yields down. Other buyers know this so are not buying at lower rates. It seems to be the inverse of the housing markets. Why would you buy if you know the price is going to go down next week, month, year? It is not as if the other buyers of treasuries are unaware of what is going on. I think the Fed will have to continue to buy more and more treasuries because, in the end, that will be the only way they will be able to keep the yields down. Am I way off with this line of thinking?

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Re: US Long-dated Treasuries breaking support level?

r101958,

I think the Fed is playing a very dangerous game.  They are walking a tightrope strung accross a caldron of lava, and they are using a balance beam with 1,000 lb weights on each end that also happens to have deadly snakes writhing along it. 

We know the Fed is trying to keep interest rates low.  I don't think anyone would argue against the statement that this is what they think they need to do to revive the credit markets.  We also know that the risk in doing this is that foreign buyers of US debt will shun it due to the rediculously low interest rates, and the effect of foreign US debt purchases drying up will be a devaluation of the dollar.  This effect was in full display last week as the dollar fell dramatically against other currencies.  So I think we could also say that the Fed needs to keep US debt competitive.  Of course, we all know that doing this while at the same time keeping rates low enough to accomplish the absurd goal of reviving the credit markets is an impossible task.  You can have one or the other, but not both.

So, the idea that the Fed is walking a tightrope over a caldron of lava as described above I think we can all agree on.  The question for me is, "why now?".  Why have they let rates rise slip up all of a sudden, especially when they have an infinite supply of money in the form of digital dollars and printing press dollars to counteract such forces?  

I have one theory, it's out there and shaky, but I cannot think of anything else at the moment:  The Fed has taken note of China's brilliant moves in moving out of dollars and into commodities.  They are trying to lure China back in by letting rates slip up a bit.  Either that, or China has told them flat out, either you let rates rise to X point, and we will buy again, or we're putting all our eggs into copper, gold, and other commodities. 

Would love to know what others think may be going on.  One thing is for sure:  we unfortunately can no longer count on any of this being due to "market" forces.  As the Financial Sense paper so clearly laid out, "market" forces no longer exist in the US debt market.  They're all being masked by our pesky little friends at the Fed.

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Re: US Long-dated Treasuries breaking support level?

I'm new here, and this site is simply the best.

Ok, I'd like to add in some relevant info here, and it concerns the recent Treasury International Capital (TIC) report.  It clearly shows a net outflow of capital in the amount of one quarter of $1 trillion for January and February.

For instance, from the April 15th report for the month of February:

“Monthly net TIC flows were negative $97.0 billion. Of this, net foreign private flows were negative $106.3 billion, and net foreign official flows were positive $9.3 billion.” 

So foreigners are selling off our debt.  Is anyone surprised?  I'm not one for technical analysis, but aren't long-term interest rates supposed to fall in a rising stock market?  In any case, the markets have divulged into a speculative, maniacal poker game of second-guessing Bernanke's every move.  For whatever it's worth, my prediction is another correction of the DJIA of around 2,000 points within the next few months to keep the bond market honest.

I just hate short-term, "day trader" analysis though.  Manipulation, phony balance sheets, and an estimated $1 quadrillion in derivatives have completely distorted the real economy.  Bottom line is that the currency will collapse, just like all the other bubbles did, and our efforts would be better served in preparing to rebuild a viable economy where money actually represents wealth again.

But it's so darn exciting to imagine the Fed squirming at news like this, isn't it?

 

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Re: US Long-dated Treasuries breaking support level?

Patrick-

If I understood your point correctly, I think it had a lot of merit. Let me to try to summarize what I took away and see if this is what you meant: The fed wants lower rates, but they also want foreigners to buy which they won't do at the prices needed to support lower rates. So the fed lets yields rise (and prices fall) for a while, to encourage foreign buying. Then after the foreigners buy in at a lower entry point, the fed goes back to buying again, and the foreigners, now showing a gain, hopefully hold their positions.

For this to make sense, the sudden and unexpected Fed move to allow yields to create a "foreign buying window" should presumably be timed by the Fed at a time when it's not particularly critical to keep rates low. When you think about it, in a way this is really a pretty good time. There is a big series of ARM rate resets coming in the next few months. But they haven't started to happen in size yet. So the Fed's logic could be, "Ok, we gotta let the prices down at some point in order to entice foreign buyers, so let's do that now before this big rate reset happens, because once it does we're going to have to be buying and protecting yields for the benefit of the mortgage market".

My analysis is obviously extremely speculative (guessing their intentions and strategies), but I think this makes sense. If that analysis were true, we should expect weakness in treasury prices (higher yields) to continue until whenever a large number of ARM resets are occurring, and/or whenever the Fed feels it's most critical to make low 30-yr fixed mortgages available to Americans. Anybody got any data to provide insight into when that would be?

Erik

 

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Re: US Long-dated Treasuries breaking support level?

Hi Erik,

Yes, that's basically where I was going with that, although the upcoming option-ARM resets hadn't even occured to me.  All I know is that bond prices are no longer fully market-driven, and any sharp up or downswings are automatically suspect, and the #1 suspect in all this is the Fed.  So, I was trying to make sense of why our #1 suspect might be doing this and how could it play into their hands, when viewed from their myopic vantage point.

While I had momentarilly swallowed the feeling of fear and put it away for a few weeks (albeit not completely), some of the news over the weekend and this sudden change in bond prices, has put that fear right back in the pit of my stomache again, from where it emanates all the way up my throat. 

This is not good.  I fear the rest of 2009 will make 2008 look like a banner year.

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Re: US Long-dated Treasuries breaking support level?
Patrick Brown wrote:

This is not good.  I fear the rest of 2009 will make 2008 look like a banner year.

I share your view. I personally do not feel the US can make it through 2009 without a significant breakdown, including the possibility of the crash of the USD and removal as the reserve currency. Certainly something on that level.

As Chris says, "Time to prepare."

Rog

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Re: US Long-dated Treasuries breaking support level?

Hello Pat,

My fear is worse from the fact that we just passed the largest budget in USA history that still counts our Wars as an off budget issue. 

With all this money being injected into the system, banks being able to set prices for assets and only taking loses when they sell them and the entire PPIP fiasco that is just going to start with all the arms options and other garbage loans hitting. We will have a suckers bull for several months and most will say we are on our way to recovery.  The Government will have great pride in what they have accomplished showing how great they did.  The media conveniently not report (or not report real indicators well like job losses, inflation and foreclosures).   Confidence will increase and than the bottom will fall out of wallstreet.  Will the real decline be fast, no it will be over months and may not even happen this year with a possibility of not happening till end of 2010.  However, wallstreet failure will be like a rock falling into the grand canyon.  At this time, all the people that trade on confidence and hope will lose everything and everybody that knows what is going on will do very well.

The longer the suckers bull happens the more pain we will as a people have to take. 

This is my fear.  I hope I am wrong.

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Re: US Long-dated Treasuries breaking support level?

Last update: 11:08 a.m. EDT May 4, 2009
http://www.marketwatch.com/news/story/Fe....

NEW YORK (MarketWatch) -- The Federal Reserve Bank of New York bought $8.5 billion in Treasurys on Monday, its biggest purchase to date under its program aimed at improving conditions in private credit markets and spurring lending. The debt bought included notes maturing between 2016 and 2019. Dealers submitted about $29 billion in debt to be purchased.

The Fed will continue its buybacks with another operation on Wednesday, heading towards purchasing $300 billion in Treasury securities over the next six months. Ten-year note yields (UST10Y: 3.15, +0.01, +0.2%) pared an earlier increase but remained higher by 1 basis point to 3.17%. Yields were higher before the buyback as a report on pending home sales buoyed hopes that the housing downturn may be ending, supporting stocks to the detriment of bonds.
 

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Re: US Long-dated Treasuries breaking support level?

ARM resets are no longer a factor.  They are based on four index rates:

  • Cost of Funds Index (COFI) = 1.627%
  • 1-year Constant Maturity Treasuries (CMT) = 0.64%
  • 1-year LIBOR = 1.97%
  • 1-month LIBOR = 0.41%

ARMS that are now resetting are coming in at lower rates.  So Mr. Bernanke has already "fixed" this problem by throwing half a trillion dollars into the Term Auction Credit (TAF) facility, which has completely distorted LIBOR. 

But not to worry, we still have interest-only loans that will reset into principal+interest.  And then you have all that negative amortization going on with the Pay Option ARMS, where borrowers only make the minimum payment.  Finally, the commercial real estate market is beginning to tank.  Factor in all those job losses and we still have a recipe for disaster.

The Fed feels it's most critical to make low 30-yr fixed mortgages available to Americans right now!  They're losing control of the long-end of the Treasuries.  There's only so much money you can print before the market starts acting up.  If you could just "paper over" your losses, Zimbabwe would be the richest country in the world.  They have a really great equities market, though.

Erik T.'s picture
Erik T.
Status: Diamond Member (Offline)
Joined: Aug 5 2008
Posts: 1234
Re: US Long-dated Treasuries breaking support level?

Wow! The fed throws $8.5B of cash into the 10yr market and the prices (and yields) basically stay flat! So it seems like Ben's plan isn't working.

I've definitely come to regret covering my short in the 30yr market, and may re-enter the trade, even at current levels...

Erik

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5971
Re: US Long-dated Treasuries breaking support level?

NEW YORK (MarketWatch) - The Treasury Department sold $35 billion in 3-year notes to yield 1.473%.

The amount matches last month's sale as the most on record.

Bidders offered $2.66 for every dollar available, compared with an average of $2.29 at the last four auctions. Indirect bidders, a class of investors that includes foreign central banks, bought 37.3% of the sale, compared to 37.9% on average at the last four offerings.

There go the foreign central banks again buying up slightly more than a third of the total, enormous "offering".

Why would foreign central banks be doing this?  Why would they expose their citizens to massive losses?  That's unclear to me although I might speculate that central banks have several interests on their priority list and their own citizens occupy a space other than #1.

It's this sentence in the article that explains why it is so important that the central banks continue with their policy of buying a third of every US government treasury auction:

The government's bond sales have received extra attention in recent months as an indication of how well the U.S. can finance all the economic stimulus and financial market stability programs lawmakers and the Federal Reserve have enacted.

Does it not seem odd that whether the auction is relatively modest or the largest on record that central banks step in for roughly a third each time?

If I were consulting to the central banks strategy departments I would advise that they vary the amounts from time to time between 20% and 40%.  You know, to make the amounts appear more credible.

Lemonyellowschwin's picture
Lemonyellowschwin
Status: Platinum Member (Online)
Joined: Apr 22 2008
Posts: 561
Re: US Long-dated Treasuries breaking support level?
cmartenson wrote:

If I were consulting to the central banks strategy departments I would advise that they vary the amounts from time to time between 20% and 40%.  

Have their amounts fluctuated like this in the past?

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