A Dangerous Bond Bubble by Marty Chenard

oldfairy

As reported two weeks ago: spreads had been sending a caution sign for the risk of yields rising. That has been happening, and the 30 year yields are rising ...

It was June 2008 when the 30 yields had hit its last peak level before dropping. From there, it down trended until it hit a low not seen in well over a decade.
That low was made in December of last year. Since then, the 30 year yields have been rising ... this was not just a rise, it was a rise that penetrated a 10 month Resistance line.

Why is this important?
Because the Fed has a mission to keep 30 year mortgage rates below 4.5% in an effort to give the housing industry a chance to recover.
With the 30 year yields moving above this long term resistance, the markets are saying that risks levels and the threat of inflation demand higher yields.
The Fed is saying, "no, we want the yields to stay low".
The Fed has already spent over $100 billion in purchasing Treasuries in an effort to keep rates down.
Just as the yields are now breaking through a long term resistance, the Fed is going into battle and is expected to buy another $300 billion in bonds over the next 6 months in a continuing effort to force mortgage rates lower.
So, rather than normal market forces interacting with each other, we have the overt manipulation of Fed interference.
It is a zero sum game in the end for the Fed because they will cause a bubble in bond prices that will have an ugly ending.
Pete Seeger's song lyrics had it right ... When will they ever learn?

snowwolf229

soulvirus

NewMember

从LONG TERM看，股市和TYX是一起涨的。因为股市强时，钱从BOND流向股市，TYX才会升。所以TYX升，是人们对股市有信心对经济的反映。

NewMember

Another factor is inflation.  When people expected inflation goes higher, they will move money out of T-bond.  That also causes higher yield.

In the end, only the economy will decide where the market goes.  Only that its effect can be ahead of time or be delayed depending on how people see the current economy condition and its prospect.

朱坚强

4# NewMember

ultimate

NewMember

4# NewMember
朱坚强 发表于 2009-5-17 01:10

Forgot one thing in my last comment, the impact of inflation.  

In late 70s and early 80s, inflation was sky higher, completely out of control and the interest rate was over 10%.  That's why the yield was high.  Last December's low yield is a result of panic, not a normal.  It showed that money just swamped into treasury for a safe haven, implied a over-the-top pessimism about the economy.

acura

thanks

winwise

从LONG TERM看，股市和TYX是一起涨的。因为股市强时，钱从BOND流向股市，TYX才会升。所以TYX升，是人们对股市有信心对经济的反映。
NewMember 发表于 2009-5-17 01:28

这句话可有点扯了。
市场里透露的东西不一定完整，其背后的原因可以是多样的

winwise

Forgot one thing in my last comment, the impact of inflation.  

In late 70s and early 80s, inflation was sky higher, completely out of control and the interest rate was over 10%.  That's why th ...
NewMember 发表于 2009-5-17 22:19

这个不错，FED做大头，怕什么。
FED买单啊，多好的事情。 FED真难做，又想印钱解决通缩，又得保持长期利率。

真是悬崖边上的舞蹈，看得都让人心惊，他们倒是很ENJOY。
BOND的市场其实很UGLY的，很多大鳄倒来倒去赚FED的钱