Monday, October 15, 2007

10-Year Treasury Yield Breaks Out / Bernankes "Reverse Conundrum"

Schadenfreude! It looks like Bernanke has his own conundrum. He is now witnessing a conundrum turned upside down. Since the Fed’s 50 basis point rate cut on 18 September – the first in what will presumably be a series of cuts – long-term bond yields have risen rather than fallen. It is for sure no coincidence that at the same time the $ has tanked to historic lows and commodities & gold have soared.....Well done.....

Schadenfreude! Es sieht so aus als wenn Bernanke sein eigenes Rätsel im Hinblick auf dás lange Ende der Zinskurve zu lösen hat. Im Gegensatz zu Greenspan der sicher insgeheim die niedrigen Zinsen am langen Ende bejubelt hat wird Bernanke dieses "Rätsel" wohl verfluchen. Es ist sicher kein Zufall das im gleichen Zeitraum der $ auf historische Tiefs abschmiert und Rohstoffe sowie Gold nur eine Richtung kennen....Gut gemacht.

After months of declines, the yield on the 10-Year Treasury Note broke out today above highs reached in mid-September, sending bond prices lower. After bottoming at 4.32% on September 10th, the yield has risen to its current levels of 4.70%, as equity markets have gained as well. Today's breakout could mean yields are ready to make another leg up.

Thanks to Bespoke

And news like this will add pressure to the bond "conundrum"

Treasury Sales May Rise 50% as Deficit Suddenly Grows

America to press for restrictions on potent sovereign wealth funds

China's $200 Billion Fund to Buy Strategic Stakes

If we are Rome, Wall Street's our Coliseum

Capital flows to U.S. fall by $163 billion in August

Grim Forecast for State Budgets

The US trade deficit is falling, but not as fast as the world’s demand for US debt.


I want to highlight this great piece from iTulip about the long term outlook for yields Captive bidding at the auction: How bond vigilantism was swamped . Looks like a major support will reverse course and will be a significant upward pressure for yields....

Zudem möchte ich gesondert auf Captive bidding at the auction: How bond vigilantism was swamped von iTulup hinweisen. Hier wird gerade auf längerfristige Sicht ein zur Zeit noch unterstützendes Element massiv ins Gegenteil umschlagen und den Aufwärtsdruck deutlich verschärfen....

I´m already waiting for the spin that when the Turkish/Kurdish tension are heating up that this will be good news because this will bring yields down ("Flight to Quality" etc) . If you really hear this argument from a stock market bull it is time to short the market or at least to sell .....

Ich hoffe das uns ein neuer Spinversuch im Zusammenhang mit dem Türken/Kurden Konflikt erspart bleibt. Es ist nicht auszuschließen das wenn die "Flucht in die Staatsanleihen" einsetzt und damit die Renditen weltweit fallen dieses als Argument für weiter steigende Aktienkurse herhalten muß. Solltet Ihr das zu hören bekommen ist es höchste Zeit den Markt zu shorten......

UPDATE 20th Oktober:

One week later the 10 year has broken 4.50 , $ at new lows, oil at 90, etc....

Binnen einer Woche hat sich das Blatt gewendet. Rendite unter 4,50%!, dazu $ auf neuen Tiefen und Öl bei 90$ usw.....

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10 Comments:

Blogger jmf said...


China Citic Bids for Bear Stearns Stake, Jiang Says

10:57 PM  
Blogger jmf said...

In addition to the iTulip post


Demographic Tsunami / Michael Panzner

11:02 PM  
Blogger Edgar said...

Moin jmf,

I normally cover a wide range of topics on my blog, but I happened to write a commentary on Bernanke's latest speech recently. I hope you like it.

11:03 PM  
Blogger jmf said...

Moin Edgar,

nice rant.

I have stopped listening to every official.

The action always speaks louder than words.

And almost every central bank around the world has proven that all the tough talk is just noise....

In the end they will step up and will bail the players out.

And the markets are getting used to it. The Fed & Co has lost the little bit of credibility that was left. The 10 year and gold are clear signs....

Nice to see that they have now fuled the animal spirit again that has lead to the next problem with spiking commodity prices etc....

The beat goes on....

11:24 PM  
Blogger jmf said...


Joseph Stiglitz: Amerikanisches Kartenhaus

11:46 PM  
Blogger jmf said...


Delphi and Calpine Bondholders Undermined by Subprime Seizure



Delphi Corp. and Calpine Corp. bondholders, who were promised returns of 20 cents or more on the dollar in cash plus stock for their investments in the bankrupt companies, can blame the subprime-induced seizure in the credit markets if they end up with a lot less.

Delphi, the largest U.S. auto-parts maker, hasn't been able to secure the $7.1 billion in debt financing it needs to pay creditors including former parent company General Motors Corp. and exit court protection. Calpine, a California power producer, said its $8 billion financing package may fall through if it doesn't complete its reorganization by Jan. 31.

When bankrupt companies are forced to take smaller exit loans, there is less cash to distribute and higher-ranking creditors will get more stock or bonds. Lower-ranking creditors may have their recoveries reduced or eliminated altogether. Calpine said that finding new financing could cost it $800 million more in interest.

12:10 AM  
Anonymous Contradictificationer said...

can someone please tell me what 'MOIN' means?

3:30 AM  
Blogger jmf said...

@ Contradictificationer

"Moin" is a local ( northern part of Germany) word for hello, good morning etc

3:36 AM  
Anonymous Anonymous said...

We should discuss the news about China's 4th largest bank having 23% non-performing loans... obviously this disaster has re-developed after the last round two years ago and will get worse as projects keep getting delayed/cancelled for lack of financing in China ... that sucking sound is the RMB

12:40 PM  
Blogger jmf said...

Moin Anon,

do you have a link for the story?

Thanks

9:37 PM  

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