Bonds 02 (Sep 10 - Aug 12)

Bonds 02 (Sep 10 - Aug 12)

Postby winston » Mon Sep 06, 2010 9:08 am

Weekly Review

Bonds. Bonds gapped lower for the third straight day. They filled most of the gap higher from early August that took it above the important twin peaks. We bought into some puts on Thursday, and we banked some of the gain on Friday.

We will see if bonds break this important support level. If they do, they are heading back down into this range and these peaks and valleys. We will make more on our TLT as it turns lower.

It was not long ago indeed on Tuesday that the 10 year was 2.47%. There was quite the turnaround in bonds (US 10 year 2.70% versus 2.62% Thursday).

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Re: Bonds 2 (Sep 10 - Dec 10)

Postby iam802 » Sun Sep 12, 2010 12:01 pm

The Great Bond Market Crash of 2010

http://oilprice.com/Finance/the-markets ... -2010.html

Monday, 30 August 2010 01:56
OK, maybe it hasn't really crashed yet. But the two day, 3 ½ point sell off in the futures for the 30 year Treasury bond (TBT), at the end of last week was the sharpest drop in 18 months. Winston Churchill's great 1942 quote, which marked the turning of the tide for Britain in WWII, comes to mind. "This is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning."

In my recent piece on the extreme overvaluation of government debt, I pointed out that the last time rates were this low, Treasury bonds brought in a miserly 1.9% yield for a decade. Professor Jeremy Siegel at the Wharton School at the University of Pennsylvania has one upped me. After yields bottomed in 1956, bonds suffered negative returns for 30 years!

This should have occurred to me, as the first mortgage I took out on a Manhattan coop in 1982 carried an 18% interest rate. That was then Federal Reserve governor Paul Volker was waging a holy war on inflation and eventually won. I took out one of the first ever floating rate mortgages, and by the time I sold it three years later, the rate had melted down to only 11%. I tell this story to kids buying their first starter homes now and they look at me like I'm some kind of dinosaur.

I have always believed that markets will do whatever they have to do to screw the most people. A big part of the parabolic move in bond prices was caused by so many investors going into this the wrong way. Hedge funds were short Treasuries and long steepeners, while mutual and pension funds were underweight.

Remember, this was supposed to be the trade of the year? Of the decade? Only individuals and momentum players have been in there buying with both hands, not because they love low yielding bonds so much, but because they hate equities. All it took to set the cat among the pigeons was for Q2 GDP to come in at 1.6%, not as bad as expected, and for Ben Bernanke to remain silent about any plans to flood the markets with more liquidity.

This may not be the top in the bond market, but it is starting to resemble what tops look like. One more equity puke out in September could easily get us there.

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2. The trend will END but I don't know WHEN.

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Re: Bonds 2 (Sep 10 - Dec 10)

Postby winston » Mon Sep 13, 2010 8:39 am

Weekly Review

Bonds. Since there was no fear and stocks were up, bonds sold off again (US 10 year 2.79% versus 2.75% Thursday). It was not long ago that the 10 year was in the 2.5 range. It sold back off and broke below the 50 day EMA.

Indeed, it hit a new closing low for this selloff of the past three weeks. Now it has filled the gap, and it is sitting right on top of the June and July peaks That is where it sold off last week before it bounced, and now it has come back to test.

It is a key point for the bonds. If it can hold and bounce here, we will have an upside play. This is going to be key, and I note that there was a tight doji on Friday at this level, so it may yield an upside play on the TLT. We will have to see.

Bonds have gone about as far as they can go. If there is any hint that the world economies will improve, then bonds are going to sell. They have been rallying like crazy. Right now we will watch.

Maybe next week we can get another quick upside play off of this one but, overall, I do not like the prospects for bonds getting much higher long term, although they are at key support right now.


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Re: Bonds 2 (Sep 10 - Dec 10)

Postby winston » Tue Sep 14, 2010 9:45 pm

Talk is cheap...

Trade War: China Fires First Shot, Hints It Might Dump US Bonds

The United States would be the loser if it touched off a trade war by labeling China a currency manipulator or imposed import duties to offset perceived undervaluation of the yuan, a government researcher said on Tuesday.

Any punitive measures against Beijing risked backfiring because China is the fastest-growing market for American exports, Ding Yifan, an economist with the Development Research Centre, told a seminar on Sino-American trade ties.

A total of 93 U.S. lawmakers have signed a letter urging Democratic leaders in the House of Representatives to schedule a vote on a bill to get tough with China over its exchange rate.

The bill would let the U.S. Commerce Department slap countervailing and anti-dumping duties on "injurious imports from any country that persistently undervalues its currency."

Ding said Beijing could also make the point to Washington that the dollar and the U.S. economy would suffer if China were to sell down its vast holdings of U.S. Treasuries.

Ding's think tank reports to the State Council, China's cabinet. His views reflect one strand of thinking in government circles, but not official policy. No Chinese leader has threatened to dump the country's dollar holdings, which make up some two-thirds of its $2.45 trillion in international reserves.

http://www.moneynews.com/Headline/China ... /id/370164
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Re: Bonds 02 (Sep 10 - Dec 10)

Postby iam802 » Thu Sep 16, 2010 10:53 am

Watch Out, If You Own These Popular Income Investments (TLT)

http://etfdailynews.com/blog/2010/09/15 ... ments-tlt/

Income investments are on fire right now… Take the MLP sector as an example. MLP stands for “master limited partnership.” It’s a special corporate structure used by about 100 small companies – mostly natural gas pipelines. MLPs can make excellent dividend investments. You can usually expect to earn around 9% a year in dividends from them.

But over the last 16 months, Wall Street has introduced six new funds focusing on MLPs. Investors have poured billions into them. Kinder Morgan and Enterprise Products – the two largest MLPs – now yield only 6%.

Emerging market bonds are another popular income investment. Because these “developing” countries often have high inflation rates, weak currencies, and poor credit histories, investors can earn double-digit yields buying emerging market bonds.

But right now, Brazil’s 10-year bond yields just 3.59%. Mexico’s 10-year yields 3.63%. Columbia’s 10-year yields 3.82%.

Other popular income investments are soaring, too. Corporate bonds are trading at world-record low yields. Junk bonds are up 31% since the days before Lehman Brothers went bankrupt and 9% this year. In the mutual fund industry, investors have poured almost $20 billion into bond funds, by far the largest inflow into bonds ever seen.

Underpinning this boom is the most important market of all for income investments: the U.S. Treasury bond market.

The Treasury bond market is the world’s largest, most liquid bond market… so it sets interest rates on all other income investments. When interest rates fall in the government bond market, interest rates on all other income investments fall. When Treasury bond interest rates rise, all other interest rates rise, too. (This is why professional bond traders always quote bond yields as a “spread over Treasuries.”)

In the last six months, the 10-year Treasury bond’s interest rate has collapsed from 4% to 2.5%. That has pushed yields on other income investments lower… and pushed prices through the roof.

As the writer of an income-focused investment advisory, the boom in high-yield investments has put a fire under my portfolio. Of the 30 open positions I added to my portfolio since March 2009, 27 are showing a positive return. Our average return is more than 35% in an average holding time of 13 months.

Here’s the thing…

I’m concerned this “income” boom might be nearing an end. First, three major investment houses – Goldman Sachs, PIMCO, and Bank of America – published research this month predicting even lower Treasury bond yields. Whenever you see Wall Street firms all saying the same thing, you know it’s already “baked into” the price.

Second, when there’s no one left to buy, prices fall. According to a report from the Commodity Futures Trading Commission, in April, speculators held a massive 274,741 contract net-short position in the 10-year Treasury note future. Now, they’re holding a net-long position of 62,919 contracts. That’s a net swing to the long side of 337,660 contracts. Is there anyone else left to buy?

Finally, the price trend looks to have reversed in the last two weeks. This chart shows (NYSE:TLT), the largest, most liquid exchange-traded Treasury bond fund. This month, the bond market has already lost more than a quarter of the gains it generated in the last six months.

Image

In sum, there’s been a big boom in income investments, but the recent reversal in the Treasury bond market may be signaling an end to this boom. MLPs, emerging market debt, and junk bonds are especially vulnerable. They’ve climbed the farthest, and they’ll fall the fastest if the Treasury bond’s interest rate keeps rising.

If you own investments in any of these sectors, you should consider tightening your stop losses. Otherwise, avoid them until their yields return to more reasonable levels.

Written By Tom Dyson From Daily Wealth

1. Always wait for the setup. NO SETUP; NO TRADE

2. The trend will END but I don't know WHEN.

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Re: Bonds 02 (Sep 10 - Dec 10)

Postby winston » Mon Sep 20, 2010 7:16 am

Weekly Review

Bonds finished a bit stronger on the session (10 year 2.74% versus 2.76% Thursday), but they were down for the week.

We have had a dramatic run higher, a selloff, and an important gap lower on Thursday. Then a modest rally on Friday that did not alter the break of this important support level.

I still anticipate bonds to roll over and fall further next week toward the support level marked by the July and August lows (not to mention the May and June peaks).

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Re: Bonds 02 (Sep 10 - Dec 10)

Postby winston » Mon Sep 27, 2010 7:13 am

Weekly Review

Bonds. While the dollar was getting hammered, bond yields actually rallied. Bonds sold off. Bonds had rebounded sharply this week, but closed out the weak with a decline (10 year 2.61% versus 2.54% yield).

Bonds sold, and that drove yields higher on Friday. You would expect bonds to sell in an inflation environment. Bonds have been rallying, but they have rallied and they sold off. Now we will see what happens.

Do we get something of an ABCD pattern? We will have to watch what develops over the next several weeks to see if there is a consolidation that continues higher. That would be an anomaly with the gold play hitting new highs.

We may get a rollover that breaks down, which would be more what I would expect if there was an inflation play ahead.

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Re: Bonds 02 (Sep 10 - Dec 10)

Postby winston » Wed Sep 29, 2010 9:09 pm

Over the past few weeks, many parrots on CNBC, have been saying that Money would be flowing out of Bonds into Equities very soon because of the ultra low interest rates.
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Re: Bonds 02 (Sep 10 - Dec 10)

Postby iam802 » Wed Sep 29, 2010 9:12 pm

TLT still going up leh.. after the initial dip.
1. Always wait for the setup. NO SETUP; NO TRADE

2. The trend will END but I don't know WHEN.

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Re: Bonds 02 (Sep 10 - Dec 10)

Postby kennynah » Wed Sep 29, 2010 10:29 pm

no worries...106 could be a resistance....good luck
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