Bonds 02 (Sep 10 - Aug 12)

Re: Bonds 02 (Sep 10 - Dec 12)

Postby winston » Tue Jul 17, 2012 8:20 pm

Treasury bonds have skyrocketed… bond fund TLT is up 40% over the last 12 months, while the S&P is up 3%.
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Re: Bonds 02 (Sep 10 - Dec 12)

Postby winston » Tue Jul 17, 2012 8:23 pm

The Bond Market Bubble Is Going to Pop Tomorrow By Jeff Clark

No matter what Federal Reserve Chairman Ben Bernanke says to Congress this week, he's likely to burst the bond bubble.

Treasury bond prices have rallied dramatically over the past few months, and the yield on the 10-year Treasury note dropped to a historic low below 1.5% last week.

Most of television's talking heads argue investors are rushing into the perceived safety of U.S. Treasury obligations in one giant "risk-off" trade. "Investors are scared," they argue. "So they're willing to accept miniscule returns in exchange for keeping their principal safe."

I don't see it that way. In fact, the rush into Treasury bonds looks to me like the biggest "risk-on" trade we've seen since the dot-com stock mania…

You see, bond investors are playing a game of "front-running" the Fed. They expect another quantitative easing announcement – perhaps during Bernanke's testimony to Congress this week. They're counting on that announcement to push bond prices even higher.

No matter what happens, though, bond traders are going to be disappointed.

The tremendous rush into Treasury bonds over the past few months has set up a near-perfect "sell on the news" environment.

If we don't get another QE announcement, the bond market will sell off on the disappointment. If we do get a QE announcement, the bond market has already discounted that news, and traders are likely to sell on the event.

Think about this…

In November 2008, as Lehman Brothers was going bankrupt, the mortgage market was disintegrating, and the financial world was on the brink of collapse, the Federal Reserve Board made the unprecedented announcement that it would use its money-printing abilities to prop up the price of Treasury bonds and mortgage-backed securities through what it called quantitative easing (aka QE).

Bond prices rocketed higher and interest rates plummeted as investors realized the Fed would provide a backstop against any adverse move in the bond market. This was the first time the Fed had ever done such a thing. The market was not expecting the move, so it had not discounted that possibility.

Since then, the market has done an admirable job of discounting the Fed's willingness to manipulate bond prices. In March 2009, when the Fed announced an increase in the size of its QE program, Treasury bonds actually sold off on the news.

Investors were expecting the action and had bought positions in advance of the event. So it was time to "sell on the news." Bond prices fell 15% over the next two months… and stayed down until June 2010, when the Fed hinted at the possibility of a second QE program.

Once again, investors rushed into the bond market – secure in the knowledge the Fed would prop up prices. Bond prices rose and interest rates fell as the market discounted the future QE2.

By the time the Fed announced QE2 in November 2010, it was time once again to "sell on the news." Bond prices fell 15% over the next four months.

Ever since QE2 ended last July, investors have been betting on QE3. It has to happen. The Fed has to keep up the charade. So folks have been piling into the bond market at record-high prices and record-low rates because they're discounting QE3.

If we do get a QE announcement this week, we'll likely have another "sell on the news" event.

It seems that no matter what happens with the Fed, this week should mark at least a short-term top in the bond market – if not a complete bursting of the bond bubble.


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Re: Bonds 02 (Sep 10 - Dec 12)

Postby winston » Sun Jul 22, 2012 5:30 am

Risk-Off

Richard Weeks, a managing director at HighTower's VWG Wealth Management, said the action in the U.S. Treasuries is telegraphing increased trepidation about the eurozone's stability.

"Often the bond markets tell us certain things in advance of other markets," said Weeks.

"There are some alarming signs in bond market.

The 10-year Treasury has fallen below 1.5%. That doesn't sound like what I would call risk on.

And the Spanish-German spread on 10-years went to an all-time high today. The signs of stress have not abated."


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Re: Bonds 02 (Sep 10 - Dec 12)

Postby winston » Mon Jul 23, 2012 8:26 am

Bonds. 1.46% versus 1.51% 10 year US Treasury.

Bonds surged. The Treasury is acting as a safe haven, as is the US dollar versus the euro as the European issues reemerge.

Remember, in northern Europe investors are paying Germany and Finland to hold their money.

In other words, they have negative rates of return on their 2 year bonds.


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Re: Bonds 02 (Sep 10 - Dec 12)

Postby winston » Tue Jul 24, 2012 8:02 pm

The Bond King Doesn't Like Bonds… "Real Assets Are the Better Bet" By Dr. Steve Sjuggerud

Over the weekend, the Bond King "tweeted" twice…

His points were simple: You can't make money in bonds. Real assets are the better bet now.

I agree with the Bond King. And I think one "real asset" looks like a great bet here.

Bill Gross is the "Bond King"… He earned this reputation from decades of outperforming his peers in bonds. And he runs the world's biggest bond fund. But he doesn't like bonds today.

A key reason he doesn't like them is because after inflation, you're actually losing money in bonds. You're losing "purchasing power."

The Bond King asked, "How will investors maintain purchasing power? Stocks maybe. Real assets are the better bet."

"Real assets" typically means commodities and real estate. And between those two, there's one clear winner for me.

Take a look at the chart below, from the latest issue of my True Wealth newsletter. It shows real estate versus gold. To me, real estate looks like the place to be.

The price of gold has gone up for 11 years straight. Meanwhile, real estate is dirt-cheap by any measure… It's more affordable than ever (thanks to record-low mortgage rates)… And the uptrend is just beginning.

When even the Bond King says you don't want bonds, you know it's time to lighten your load in bonds and other paper assets (like cash in the bank).

He says real assets are the better bet. Based on his track record, you should listen.

Of the real assets out there, I believe real estate is the one that offers the least downside risk and solid upside potential.

Listen to the Bond King.

Get rid of some of your bonds (and other paper assets) and replace them with real assets.

Real estate is my favorite real asset now… It's what I'm doing with my own money… You should consider doing the same.

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Re: Bonds 02 (Sep 10 - Dec 12)

Postby kennynah » Tue Jul 24, 2012 9:37 pm

all european 10Y bond yields went up this morning...
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Re: Bonds 02 (Sep 10 - Dec 12)

Postby winston » Mon Jul 30, 2012 8:41 am

Weekly Review

Bonds. 1.55% versus 1.43% 10 year US Treasury.

Bonds struggled. Pretty much a beating about the head and shoulders. That is a tremendous decline. Why?

If Europe will get better magically, then the US Treasury will not be needed as much as a safe haven. Therefore there has been some unloading of bonds over the past couple of sessions, particularly on Friday.

Note that after breaking above the late-May/early-June high, bonds immediately reversed and sold down. No follow-through to the upside.

That is always something to watch for: On a break higher or a break lower, is there follow-through to the upside?

Here that is not the case. More than that, there was a gap to the downside and a stiff tumble lower.


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Re: Bonds 02 (Sep 10 - Dec 12)

Postby winston » Tue Jul 31, 2012 6:26 am

Kass: 8 Reasons to Short Bonds for the Next Decade by Cullen Roche

Doug Kass was featured in this weekend’s Barrons and offered some interesting reasons for his long-term bearish view on bonds. He calls this his “favorite short of the next decade”.

The 8 reasons for his bearishness (some of which I obviously disagree with): expensive, poor after tax-yield, weak economic growth, Fed policy, higher inflation inflation, housing recovery, asset reallocation from bonds to stocks, bond vigilantes attacking unsustainable fiscal situation (via Barrons):

http://pragcap.com/kass-8-reasons-to-sh ... ext-decade
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Re: Bonds 02 (Sep 10 - Dec 12)

Postby winston » Tue Jul 31, 2012 7:47 pm

U.S. GOVERNMENT BOND BUYERS BEWARE by Jeff Clark

All month long, we've heard how the yield on the 10-year Treasury note keeps making new historic lows. In fact, last Wednesday, the yield dropped to just 1.4% – the lowest yield of our lifetimes.

But when markets make extreme moves, the reversals can come suddenly and seemingly from out of nowhere. That may be happening now with the 10-year note.

The yield on the 10-year U.S. Treasury note spiked above 1.51% on Friday. It was one of the biggest one-day spikes we've seen all year.

While one day's action does not make a trend, it is worth keeping an eye on. If the yield can get back above 1.6% – where it started the month – the intermediate trend will shift toward higher interest rates and lower bond prices.

That's bad news for anyone who's been buying Treasury notes over the past month.


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Re: Bonds 02 (Sep 10 - Dec 12)

Postby winston » Wed Aug 01, 2012 12:02 pm

Given our macro outlook, we favour Bonds over Equities.

We are Bullish absolute returns for Fixed Income over the next 6-9 months and we are Overweight longer dated US Treasuries (TLH:NYSE ; TLT:NYSE), longer dated US Corporates (LQD:NYSE ; VCLT:NYSE), US$ denominated EM Sovereigns (EMB:NYSE), US$ denominated Asian Sovereigns & Corporates (N6M:SGX ; O9P:SGX), while Marketweight Treasuries of <10yrs, and Marketweight Asian debt of local currency
denomination.


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