IF you remember last year in September, out of the blue Job Numbers came out so bad and media started warning of double dip.. Markets went down 600 points and many Blue Chip stocks were down more than 5% in one day, despite SEC had promised that they had controls in place to prevent stock crashes..
Then in 1-2 months everything became normal and there was unbelievable rally for next 6 months
With the Government debt being so high and even borrowing from foreigners and central bank at 3.5%-5.5% is a huge burden to the government, compared to selling treasuries at 1.5% or negative interest rates.
From the late part of 2008 to this date, Banks borrowed from FED at almost 0% and bought treasuries that yielded 3.5%. It was an easy job. That is when the media and the Government bragged about recovery and stuff.They had tightened lending due to loses from people unable to pay the debt and this was a sweet deal for them to make money despite not lending.
I believe that the Government has learnt to deal with customers(foreigner investors) directly selling treasuries at 1.5%. They recently announced that China could buy treasuries directly instead of going through Wall Street Firms. I have a sense of doubt about the governments direct dealing.
Let us see the news head lines lately...
China growth slows..
US Job numbers slow
stock market slows/ crashes and investors want safe heaven
They go and buy US treasuries at 1.5%
They even pay German Government money to park their money, Since Germany pays -.09 %..
This could be one or two reasons along with Greece/Spain mishaps
If the stock markets are going high why would any one want to buy treasuries at 1.5 %. All they had to do is scare the heck by bringing job growth numbers out and flexing it to their convenience .. They could continue this for a few months while accumulating job numbers to give a pre election 3 months surprise. JPM ,Citi Group(NYSE:C) Goldman Sachs (NYSE:GS) are reeling in their lows and no one want to touch them due to fear. This feels like a game of Governments and Banks.
Disclosure: I am long VXX.
Additional disclosure: I have bought VXX stock @ 17.x, sold covered Call options for higher prices and also bought a VXX Put. Kind of a straddle...Buy and sell based on the swings..