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The 10-year Treasury yield sinks to 1.68% - the lowest level since December - in wake of...

The 10-year Treasury yield sinks to 1.68% - the lowest level since December - in wake of the jobs report. The so-called Great Rotation out of fixed income and into equities has reversed dramatically over the past 5 weeks. TLT +2.4%, SPY -1.2% premarket. Today's WSJ has a piece about bond-oriented hedge funds reshaping themselves into equity players. Can't make this stuff up.
Comments (8)
  • contrarianadvisor
    , contributor
    Comments (737) | Send Message
    The ten year is on its way to 1/2 of 1%! Almost the entire Street has been on the wrong side of this call.
    5 Apr 2013, 09:40 AM Reply Like
  • Whitehawk
    , contributor
    Comments (3129) | Send Message
    You should follow Matt Bradbard. Some of us who comment on his reports have been making this call and warning against shorting Treasuries. Rangebound market with some great swing trading potential. I've also said I wouldn't be surprised to see the 10-year reach 1% at some point, but this needs to be monitored through the price action.
    5 Apr 2013, 12:09 PM Reply Like
  • uncensored patriot
    , contributor
    Comments (61) | Send Message
    This may actually be significant.
    5 Apr 2013, 09:55 AM Reply Like
  • prginww
    , contributor
    Comments (55) | Send Message
    If the Fed did drive the 10 year to 1% it would make no sense what so ever for anybody bank, finance company or even a loan shark to lend anybody any amount of money for more than 6 months at a time.


    Such a low rate would certainly curtail lending in the housing market, autos, small business investment. For the large publicly traded companies they should then fire their CFOs if they did not go out and load up with cheap 5, 10 and 20 year money by issuing bonds, debentures, secured notes, etc to take advantage of the ridiculously cheap money. Firms like Apple should fire their entire executive siute if they did not borrow billions under those conditions.
    5 Apr 2013, 02:17 PM Reply Like
  • kmi
    , contributor
    Comments (3995) | Send Message


    I recently priced a 15 year mortgage refi. I wanted to see what rate I would be offered on both a 15 as well as a 10 year.


    I was interested to see that the rate on both offers was the same.


    My opinion is that there is a floor under loan rates right now, such that shorter duration risk doesn't make up for the reduction in interest income to the lenders.


    By which I mean to say that if indeed the Fed were to drive the 10y down to 1%, I wonder if it would have any further impact on loan rates.
    6 Apr 2013, 10:41 AM Reply Like
  • contrarianadvisor
    , contributor
    Comments (737) | Send Message
    So many people fail to understand the the Fed is only a part of the equation. The Fed, with all its bond buying, is a big factor on the demand side. But what will drive the ten year to 1/2 of 1% and the thirty year to 1% will only partially be due to the Fed. We are on the verge of a deflationary bust, something we haven't experienced in over 70 years. So it is understandable that most investors can't fathom the dynamics that would drive rates to those levels. An economy that is in a steep downturn will have anemic loan demand. Because of the extremely weak economic conditions and a likely financial system in freefall, the Fed will be printing money at rates even far faster than at present. And finally, investors will be flocking to Treasuries as one of the very few safe refuges during a time of tremendous economic turmoil. Most investors may not see it yet but a global deflationary bust is just ahead.
    6 Apr 2013, 11:08 AM Reply Like
  • kmi
    , contributor
    Comments (3995) | Send Message
    " We are on the verge of a deflationary bust"


    I agree with you 100%. And everywhere I look, especially in the vehemently political circles, the fears are oriented towards hyperinflation...
    6 Apr 2013, 12:04 PM Reply Like
  • contrarianadvisor
    , contributor
    Comments (737) | Send Message
    kmi, you are so right. Wall Street is definitely overly focused on the risks of inflation even though deflation is just over the horizon. All anybody wants to know is when is the Fed going to end QE. We are so far awy from that point, maybe not timewise but in terms of the QE yet to come. Because I am expecting a bust that exceeds what we saw in 2008/9 and where the world's financial system will be in freefall, I fully expect $10 trillion or more additional QE in the next 12-18 months. That what i am estimating it will take to stop the freefall. Most people are failing to grasp just how substantial the deflationary headwinds are and how much more stimulus is required to overcome it. Now that the bust is so near, it is clear to me that most of the policy response will come in a panicked reaction to a bust not in anticipation of the bust. When policymakers act in panic they tend to overreact. Deflation is a whole different ballgame from anything we've dealt with these past 70 years. I don't think policymakers or investors are at all prepared for what's just over the horizon.
    6 Apr 2013, 01:34 PM Reply Like
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