ABC reversal
Wednesday, April 20, 2005
Tuesday, April 19, 2005
Homerun setup
Each blue line divergence has been a great money making long or short. Another setup is here...
1. we selloff large after CPI tomorrow
2. we spike up first after tame CPI making another RED LINE as we did for the previous top giving the best entry for a multi-month short op.
Greenie giving you a second chance to lock in your low rates and giving Bond bears a second short op.
Monday, April 18, 2005
NEW YORK (Dow Jones)--While Treasury yields have been on the decline
of late, the Bond Market Association's latest primary dealer survey
shows the downturn is expected to be short-lived.
Not only are yields forecast to rise, but the benchmark 10-year
note's yield is seen moving all the way up to levels not seen since
June 2002. According to the survey, released Monday, the yield on the
10-year Treasury note will rise to 4.75% by the end of June, and to 5%
by the end of September. That ranslates into a half-percentage-point
increase over the next two months.
The BMA president, Micah S. Green said in a press release that
"sustained U.S. economic growth and the series of 'measured' rate
increases by the Federal Reserve," will drive rates higher. He noted,
however, that even at 5%, the yield on the 10-year note would still be
"historically low."
When Fed Chairman Alan Greenspan famously deemed long-term yields a
"conundrum" in mid-February, the 10-year Treasury note was yielding
about 4.08%. After peaking at 4.69% in late March amid concerns that
prices pressures were on the rise, the 10-year yield has come all the
way back down to around 4.25%, having dipped as low as 4.19% in trade
Monday.
A quarter-percentage-point of that falloff came in the last week
alone, amid tepid retail sales data and minutes from the Fed's last
policy-setting meeting that didn't reveal immediate plans for
stepped-up rate hikes.
Since it started tightening monetary policy in June 2004, the Fed
has raised rates in seven consecutive quarter-percentage-point
increments, taking the target federal-funds rate to 2.75% from 1%. Fed
officials have repeatedly stated that the pace of future increases is
expected to remain gradual, provided inflation remains contained,
until the target fed-funds rate is at a level that neither stimulates
nor constrains economic growth.
It's unclear as to what a so-called neutral rate would be, though it
is widely believed to be somewhere between 3% and 5%.
The BMA's survey also predicts yields on shorter-dated maturities
will rise at roughly the same pace as long-dated yields, meaning the
yield curve - which measures the difference between short- and
long-term yields - will start to stabilize.
Since beginning the year around 1.16 percentage points, the
benchmark yield curve flattened to as low as 0.67 percentage point
last week. Mid-afternoon Monday it was trading around 0.71 percentage
point.
Separately, the survey forecasts the federal budget deficit for
fiscal-year 2005 will fall to 8.4% from a year earlier to $375
billion.
"Consistent with other forecasts, our survey respondents also
believe the deficit should continue to recede in fiscal 2005,
primarily due to higher tax revenues typical of rising corporate
profits and economic growth," the Bond Market Association's Green
said.
The survey, conducted the week beginning April 1, is issued on a
quarterly basis and reflects the forecasts of primary dealers, or
banks that deal directly with the Federal Reserve. It was
The Bond Market Association has offices in New York, Washington and
London, and represents securities firms and banks that underwrite,
trade and sell debt securities globally.
of late, the Bond Market Association's latest primary dealer survey
shows the downturn is expected to be short-lived.
Not only are yields forecast to rise, but the benchmark 10-year
note's yield is seen moving all the way up to levels not seen since
June 2002. According to the survey, released Monday, the yield on the
10-year Treasury note will rise to 4.75% by the end of June, and to 5%
by the end of September. That ranslates into a half-percentage-point
increase over the next two months.
The BMA president, Micah S. Green said in a press release that
"sustained U.S. economic growth and the series of 'measured' rate
increases by the Federal Reserve," will drive rates higher. He noted,
however, that even at 5%, the yield on the 10-year note would still be
"historically low."
When Fed Chairman Alan Greenspan famously deemed long-term yields a
"conundrum" in mid-February, the 10-year Treasury note was yielding
about 4.08%. After peaking at 4.69% in late March amid concerns that
prices pressures were on the rise, the 10-year yield has come all the
way back down to around 4.25%, having dipped as low as 4.19% in trade
Monday.
A quarter-percentage-point of that falloff came in the last week
alone, amid tepid retail sales data and minutes from the Fed's last
policy-setting meeting that didn't reveal immediate plans for
stepped-up rate hikes.
Since it started tightening monetary policy in June 2004, the Fed
has raised rates in seven consecutive quarter-percentage-point
increments, taking the target federal-funds rate to 2.75% from 1%. Fed
officials have repeatedly stated that the pace of future increases is
expected to remain gradual, provided inflation remains contained,
until the target fed-funds rate is at a level that neither stimulates
nor constrains economic growth.
It's unclear as to what a so-called neutral rate would be, though it
is widely believed to be somewhere between 3% and 5%.
The BMA's survey also predicts yields on shorter-dated maturities
will rise at roughly the same pace as long-dated yields, meaning the
yield curve - which measures the difference between short- and
long-term yields - will start to stabilize.
Since beginning the year around 1.16 percentage points, the
benchmark yield curve flattened to as low as 0.67 percentage point
last week. Mid-afternoon Monday it was trading around 0.71 percentage
point.
Separately, the survey forecasts the federal budget deficit for
fiscal-year 2005 will fall to 8.4% from a year earlier to $375
billion.
"Consistent with other forecasts, our survey respondents also
believe the deficit should continue to recede in fiscal 2005,
primarily due to higher tax revenues typical of rising corporate
profits and economic growth," the Bond Market Association's Green
said.
The survey, conducted the week beginning April 1, is issued on a
quarterly basis and reflects the forecasts of primary dealers, or
banks that deal directly with the Federal Reserve. It was
The Bond Market Association has offices in New York, Washington and
London, and represents securities firms and banks that underwrite,
trade and sell debt securities globally.
Sunday, April 17, 2005
Bill Cara: Week #15 (2005-04-16) in Review
From Bill Cara's blog... He's right
There was a considerable strengthening this week in the bond market.
The 30-year Treasury Bond Index (TYX), which is a reflection of yields showed long bond yields down 3.12 pct on the week. The 10-year (TNX) were down 4.85 pct, and the 5-year (FVX) were down 5.73 pct on the week for the Treasury Notes. But the T-Bill yield (IRX) was up 0.44 pct.
What does this mean? Well first look at the Yahoo Finance yield tables.
According to the data at Yahoo Finance, the 30-day to 30-year yield spread on the U.S. Treasuries moved down from 216 basis points three weeks ago to 208 bp two weeks ago, then up to 213 bp a week ago. But last week, bond investors read the economic data out of the U.S. and said ”Buy bonds; problems ahead.”.
From the U.S. Fixed Income (Bonds) Yield Table at Yahoo Finance, the 30-year T-Bond is now yielding 4.59 percent, down from 4.84 pct three weeks ago. That is a major drop in yields, which means a major increase in the appetite for long bonds. And, as noted, the T-Notes were in even greater demand.
This means that a collision is coming as the Fed tightens by increasing the overnight bank lending rate, which it does by buying bank reserves, leaving less for commercial banks to loan out to its clients. As the Fed knows, many of those clients are real estate speculators and commodity price speculators.
If the economy really does slow down to the pace expected by the bond investors, then pretty soon the Fed tightening will cause a flat to inverted yield curve, which signals recession is headed our way.
Do I think that will happen? Not bloody likely. Whatever you think of the economy, this week I showed you it is running on from two to four cylinders, depending on which country road you travel. Kudlow even got it right; this ‘ol engine ain’t going to die. Don’t bet against America, warts and all.
In the heat of the moment, the commercial lenders will simply have no money to lend out to certain clients at such attractive rates as they’ve been giving. So, why fight the Fed? These banks know full well what the Fed is going to do here. It’s going to continue to tighten until price speculation in real estate and commodity prices is stopped, so the commercial banks will soon start to lend a hand, and divert their available funds into loans to sustainable wealth creators.
JJ Cramer is screaming of course, but he has this problem see? He wants desperately to satisfy his CNBC audience, who he knows are mostly long stocks in an extreme bear phase, so he’s got to give them hope. He says the Fed will blink. But he loves the flaming red-hot price of his East Side Condo (or wherever it is on Millionaire Row he lives), so he loves the speculative demand that is driving prices higher.
But the Fed won’t blink.
Sorry JJC, the price of your home is going to fall before this bear cycle is over.
There was a considerable strengthening this week in the bond market.
The 30-year Treasury Bond Index (TYX), which is a reflection of yields showed long bond yields down 3.12 pct on the week. The 10-year (TNX) were down 4.85 pct, and the 5-year (FVX) were down 5.73 pct on the week for the Treasury Notes. But the T-Bill yield (IRX) was up 0.44 pct.
What does this mean? Well first look at the Yahoo Finance yield tables.
According to the data at Yahoo Finance, the 30-day to 30-year yield spread on the U.S. Treasuries moved down from 216 basis points three weeks ago to 208 bp two weeks ago, then up to 213 bp a week ago. But last week, bond investors read the economic data out of the U.S. and said ”Buy bonds; problems ahead.”.
From the U.S. Fixed Income (Bonds) Yield Table at Yahoo Finance, the 30-year T-Bond is now yielding 4.59 percent, down from 4.84 pct three weeks ago. That is a major drop in yields, which means a major increase in the appetite for long bonds. And, as noted, the T-Notes were in even greater demand.
This means that a collision is coming as the Fed tightens by increasing the overnight bank lending rate, which it does by buying bank reserves, leaving less for commercial banks to loan out to its clients. As the Fed knows, many of those clients are real estate speculators and commodity price speculators.
If the economy really does slow down to the pace expected by the bond investors, then pretty soon the Fed tightening will cause a flat to inverted yield curve, which signals recession is headed our way.
Do I think that will happen? Not bloody likely. Whatever you think of the economy, this week I showed you it is running on from two to four cylinders, depending on which country road you travel. Kudlow even got it right; this ‘ol engine ain’t going to die. Don’t bet against America, warts and all.
In the heat of the moment, the commercial lenders will simply have no money to lend out to certain clients at such attractive rates as they’ve been giving. So, why fight the Fed? These banks know full well what the Fed is going to do here. It’s going to continue to tighten until price speculation in real estate and commodity prices is stopped, so the commercial banks will soon start to lend a hand, and divert their available funds into loans to sustainable wealth creators.
JJ Cramer is screaming of course, but he has this problem see? He wants desperately to satisfy his CNBC audience, who he knows are mostly long stocks in an extreme bear phase, so he’s got to give them hope. He says the Fed will blink. But he loves the flaming red-hot price of his East Side Condo (or wherever it is on Millionaire Row he lives), so he loves the speculative demand that is driving prices higher.
But the Fed won’t blink.
Sorry JJC, the price of your home is going to fall before this bear cycle is over.
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