Bonds 03 (Aug 12 - Jun 15)

Re: Bonds 03 (Aug 12 - Dec 15)

Postby winston » Fri Jun 05, 2015 7:29 am

We could be at an important crossroads for the bond market... by Chris Kimble

It is easy to find talk these days about the Fed moving interest rates higher. Humbly I don’t know what Janet will do next. Could it be more important what billions of free thinking people do with bond positions they have at the cross roads below?

From a price perspective, the yield on the 10-year note looks to be at a pretty important price point right now in the chart below!

CLICK TO ENLARGE

The yield on the 10-year note has remained inside of a falling channel the past two years. In February yield hit the bottom of a falling channel and the rally since then has taken yield back to the top of this falling channel at (1).

Yields might have formed a bullish inverse head and shoulders pattern over the past 9-months, which if true, would suggest yields break resistance at (1) and move a good deal higher.

If this pattern read would happen to be correct, the measured move calls for the yield on the 10-year to rally to the 3.30% level, which is nearly 50% above current yields. If rates would push that much higher, it wouldn’t be pretty on bonds.

Is the 10-year note the only bond market facing an important test of resistance? Nope!

CLICK ON CHART TO ENLARGE

As you can see the 30-year bond looks to have broken above resistance and tested it as support at (1) above. Now the 30-year yield is facing falling resistance at (2).

Where bond prices and yields stand at the end of the year could have more to do with what billions of free thinking people do at these key resistance points than news coming from the Fed in the next few weeks/months!

Source: Kimble Charting Solutions

http://thecrux.com/buyer-beware-we-coul ... nd-market/
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Re: Bonds 03 (Aug 12 - Dec 15)

Postby winston » Fri Jun 05, 2015 7:37 am

Bond Bubble

Before the 10-year bund's steep sell-off started two months ago, it was yielding a plump 0.07% per year! So the 10-year bund's 7.6% plunge since then has wiped out more than 100 years' worth of interest payments!

"Obviously," as we remarked two weeks ago, "loaning money to a government in exchange for 0.07% interest per year is an absurd proposition... But an investment as stupid as that is not necessarily a bad trade.

In fact, bond yields across the eurozone have been falling so sharply (and bond prices rising so sharply, as yield and price move inversely) that many, many stupid investments have been brilliant trades.

"During the year leading up to the recent crash," we explained, "an index of 15- to 30-year eurozone bonds had soared nearly 50%. That was a brilliant trade, no matter how stupid from an investment standpoint...

"In the financial markets, this sort of trading is called the 'Greater Fool Strategy.' You make a foolish purchase, expecting a greater fool to come along and pay you an even more foolish price.

"[But] at some point," we wound up, "every stupid investment also becomes a stupid trade. The supply of 'greater fools' exhausts itself... and/or the fools and their money are parted.

"Bill Gross believes German bonds have reached that tipping point, and so do we."

And we still believe German bund prices will trend lower... and yields will trend higher. Ditto for U.S. Treasurys.

Historically speaking, both German and U.S. bond yields remain extremely low. At the end of yesterday's trading session, the 10-year bund was still yielding less than 1% and the 10-year Treasury was yielding a mere 2.36%. So there's still a lot more air inside the global bond bubble.

"But wait just a minute!" a few alert readers might protest. "Hasn't the European Central Bank (ECB) promised to buy more than $1 trillion worth of European government debt in the open market? And won't that volume of buying support prices?"

Bill Bonner answered those exact questions in our posting "Bonds Are No Longer a 'Safe Haven.'" He replied "yes" to the first question and "no" to the second. Said Bill:

Mario Draghi [head of the ECB] told us that the European Central Bank would persist in its delusions... Draghi has made it clear he's determined to implement the ECB's 1.1 trillion euro ($1.2 trillion) QE plan "in full"...

Why would bonds fall at the very moment when the biggest buyer in the world is promising to load up with more?

Ah... that is what is so classic.

While the ECB pledges to throw good money after bad, banks, hedge funds and pension funds are beginning to see high-priced, low-yielding debt as a leaky boat.

They've made a lot of money buying in anticipation of QE; they don't want to lose their gains when the bond market sinks... as it inevitably will...

Asset prices pushed up by central bank stimulus are fundamentally phony. Because there is no real wealth creation behind them.

The higher they go, the more they become detached from reality... and the more vulnerable they become.

Bottom line: The global bond market is beginning to feel a little like a high-wire act... without a net. It may continue shimmying along the wire for a while longer, but that doesn't mean it's a good idea to let it carry your investment dollars.

Source: The Non-Dollar Report
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Re: Bonds 03 (Aug 12 - Dec 15)

Postby winston » Fri Jun 05, 2015 8:40 am

Did The Bond Market Crash Just Begin?

By Michael Snyder

Source: The Economic Collapse Blog

http://www.thetradingreport.com/2015/06 ... ust-begin/
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Re: Bonds 03 (Aug 12 - Dec 15)

Postby winston » Thu Jun 11, 2015 6:18 am

Expect more "flash" crashes in the bond market

by Jim Rickards

Eventually, there would be a flash crash that would not bounce back and would be the beginning of a global contagion and financial panic worse than what the world went through in 2008.

This panic might not happen tomorrow, but then again it could. The solution for investors is to have some assets outside the traditional markets and outside the banking system.

These assets could be physical gold, silver, land, fine art, private equity or other assets that don’t rely on traditional stock and bond markets for their valuation








Source: Strategic Intelligence

http://thecrux.com/the-next-flash-crash ... -yourself/
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Inflation or Deflation 02 (Aug 14 - Dec 15)

Postby behappyalways » Thu Jun 11, 2015 3:56 pm

Bond crash across the world as deflation trade goes horribly wrong
http://www.telegraph.co.uk/finance/comm ... wrong.html
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Re: Bonds 03 (Aug 12 - Dec 15)

Postby winston » Fri Jun 12, 2015 6:03 am

Three VERY important things your broker won't tell you about bond funds

Source: Bloomberg

http://thecrux.com/if-you-own-a-bond-fu ... -this-now/
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Re: Bonds 03 (Aug 12 - Dec 15)

Postby winston » Tue Jun 16, 2015 8:07 pm

Ten-year treasury yields rise 40%-plus since February.
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Re: Bonds 03 (Aug 12 - Dec 15)

Postby behappyalways » Wed Jun 17, 2015 11:04 am

Guy Who Manages $112 Billion Sees No Bond Buyers
http://www.bloombergview.com/articles/2 ... ond-buyers
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Re: Bonds 03 (Aug 12 - Dec 15)

Postby winston » Fri Jun 19, 2015 7:37 pm

The Simplest Way to View the Bond Market By Dr. David Eifrig

It has been a wild time for fixed-income investments over the last couple years…

Interest rates are historically low in the U.S.

In Europe, rates have spent time in negative territory… meaning investors were willing to take a guaranteed loss.

It can be hard to get a handle on what's happening today in the bond market… never mind where things may be headed tomorrow.

Fortunately, as we'll explain today, there's a simple framework to help cut through the noise. We hope it will give you a more intuitive understanding of what's causing moves in bond markets and interest rates and help you figure out what will happen next.

Here's the basic bond market matrix:

These three measures (the economy, inflation, and interest rates) usually head in the same direction.

If you know which way two are going, you should have a good idea of what's happening to the third.

For instance, if the economy is heating up and inflation is rising, you can be sure that interest rates are rising, too.

Alternatively, when you see interest rates start to rise, you should expect the economy to be doing well or inflation to be rising… and likely both.

You'll notice we don't have the Federal Reserve or the European Central Bank on there. That's because their direct effect is smaller than most think.

Bond prices and interest rates react to the demand for bonds as safe assets. When the economy is growing safely, investors prefer stocks. They sell bonds and interest rates rise. Similarly, higher inflation makes the income that bonds produce look less attractive. So investors sell bonds when inflation picks up.

It's also important to realize that these actions can happen on the basis of expectations, not necessarily reality.

Last month, the European Union announced that the region's gross domestic product (GDP) grew at a 0.4% rate in the first three months of the year. That was better than expected.

Investors saw strength in the region. They also figured this lowered the chances of deflation. They took appropriate action by selling off some of the super-safe German bunds (the German equivalent to U.S. Treasury bonds) they held.

The severity of the move had to do with valuation.

We like to call high-flying stocks "priced for perfection." When a growth company trades at many times earnings, it needs to perform perfectly. If it misses earnings estimates by even a tiny bit, it can see its price collapse quickly.

The same thing happened with the German bunds that paid 0.07% in interest. Investors bought these bonds because they were scared of risks in Europe and saw no better place to put their money. When the mood is that dark, even a tiny ray of sunshine can send investors flying to the exit.

In the U.S., we're in much the same scenario. People said that rates were rising in anticipation of a move from the Federal Reserve, but we think there's a feedback loop in effect.

Yes, the Fed may raise the interest rates it controls. But the Fed won't raise rates until the economy is humming along and inflation starts to pick up.

When rates were rising, investors were reacting to those conditions, not to the Fed in particular.

Now, with Wednesday's Fed announcement that rates will remain near zero, investors are pushing back their expectation for the Fed's rate hike. Since Wednesday, rates have started to drift down again.

So yes, it's a wild time for bond markets. Keep this simple bond market matrix in mind next time you want to get a sense of where the economy, rates, or inflation are headed. You won't find a simpler way to see exactly what's happening.

Source: Daily Wealth
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Re: Bonds 03 (Aug 12 - Dec 15)

Postby behappyalways » Mon Jun 22, 2015 12:28 pm

Three Words Count in Bonds: Liquidity, Liquidity, Liquidity
http://www.bloomberg.com/news/articles/ ... -liquidity
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