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Last week's Treasury bond sell off - the worst since last summer - prompts UBS to declare the...

Last week's Treasury bond sell off - the worst since last summer - prompts UBS to declare the end of the 2-decade bull market. New "bond king" Jeff Gundlach agrees to a point, but says the 10-year too far above 3% (currently 2.32%) would self-correct because of the resultant damage to the economy. TLT -0.3%.
Comments (3)
  • AlbyVA
    , contributor
    Comments (566) | Send Message
     
    Good. Now start selling off the 30yr like it was pets.com stock. Time to make a fortune on TBT.
    19 Mar 2012, 10:24 AM Reply Like
  • Tack
    , contributor
    Comments (12717) | Send Message
     
    Grundlach's statement only makes sense if one provides a definition for "too far." Given past economies roaring along with 10-year rates at 5, 6, 7%, or more, 3% seems a yawn as any key breaking point.

     

    It's been underestimated how disincentivizing to growth in the private sector too-low interest rates (ZIRP) have been. Borrowers have been slow to press new loan demands, as complacency sets in about costs because low rates persist and consumers are told by the Fed that they'll be maintained "for years." And, lenders have little interest in assuming multi-year commercial risks at artificially-low rates.

     

    In the early phase of rate rises we will see what will seem a paradox to some, i.e., that rate increases actually energize the economy, rather than suppress it. In particular, we will see the housing market pick up, as purchasers start to apprehend both rising prices and rising rates.
    19 Mar 2012, 10:32 AM Reply Like
  • AlbyVA
    , contributor
    Comments (566) | Send Message
     
    After all, a yield curve that is Up and to the Right is "good" for the economy. Whereas a yield curve that is Down and to the Right is very, very, very bad for the economy.

     

    Long dated treasuries should be rising as the economy gets going. The selloff in 10yr and 30yr paper is good, because it says moving is shifting from safety to capitalizing on risk in the economy. And risk taking is what an economy needs to prosper. 2% on 10yr paper is a joke.
    20 Mar 2012, 08:30 AM Reply Like
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