iPath U.S. Treasury Flattener ETN (FLAT) - NASDAQ
  • Wed, Jul. 13, 11:17 AM
    • Treasurys and related securities accounted for 39.7% of Pimco Total Return Fund's (MUTF:PTTRX) assets at June's end, up from 36.4% a month earlier. June's level is the highest for Treasurys since December 2014.
    • Duration also increased to 5.7 years from 4.7 at the end of May.
    • One wonders how much of the boost came in June's final week amid the panic buying in government paper following the Brexit vote.
    • One of three managers of the fund, Mark Kiesel says the Fed is likely to stay on hold for several months, but traders - who aren't pricing in a rate hike until 2018 - are probably overdoing it.
    • ETFs: PLW, STPP, GOVT, FLAT, FTT, EGF, TAPR, USFR, TFLO
    | Wed, Jul. 13, 11:17 AM
  • Thu, Jun. 9, 11:26 AM
    • What's going on here? The yield on the 10-year Treasury has fallen all the way back to 1.66% - that's the level it was at on February 11 when oil was below $30, credit spreads were blowing out, and the Dow was nearly 3K points lower. The yield on the 30-year Treasury of 2.46% is the lowest since February 2015.
    • The yield on the 2-year Treasury, though down to 0.77% after nearly touching 1% a couple of weeks back, remains well above the level of February 11 as the Fed preps for a summer rate hike.
    • It all adds up to a sharply flatter yield curve - the 2 year/10 year spread is just 89 basis points, the slimmest since late 2007. The Fed and most Wall Street economists today (as they did in 2007) shrug off the predictive power of the flat yield curve. TLT +0.55%, TBT -1.1%
    • ETFs: TBT, TLT, TMV, TBF, EDV, TMF, TTT, ZROZ, VGLT, TLH, SBND, UBT, DLBS, TLO, STPP, FLAT, LBND, VUSTX, TYBS, DLBL
    | Thu, Jun. 9, 11:26 AM | 24 Comments
  • Mon, Jun. 6, 8:20 AM
    • The team at Goldman figures fixed-income investors stand to lose $1T if Treasury yields unexpectedly rise 100 basis points. That would be greater than than the sum of realized losses on non-agency MBS. “Some investor entities would likely experience significant distress,” say the bank's analysts.
    • Exactly what is meant by "unexpected" would be up for debate. Surveys for years have consistently shown investors expecting interest rates to be higher in future months, and the current median forecast in a Bloomberg poll is for the 10-year Treasury yield to be at 2.6% a year from now and 3.3% in 2018 vs. the current 1.7%.
    • ETFs: PLW, STPP, GOVT, FLAT, FTT, EGF, TAPR, USFR, TFLO
    | Mon, Jun. 6, 8:20 AM | 6 Comments
  • Thu, May 19, 3:11 PM
    • Like a decade ago, the Fed is in the process of hiking interest rates following an extended period of unprecedentedly low rates which had been put in place to combat plunging asset prices.
    • The 2006 rate hike cycle (which started a couple of years earlier) was meant to "normalize" rates and set in place a soft landing for the economy ... It didn't exactly work out that way.
    • As with then, writes Randall Forsyth, the PhDs at the Fed are ignoring the flattening yield curve. As pointed out by him and others numerous times ten years ago, the failure of long-term rates to follow short-term rates higher was a bright yellow warning sign. The Maestro explained it away as a "conundrum," and his successor Ben Bernanke pointed to a global savings glut as putting a damper on rates at the long end.
    • The Fed may indeed follow through on its words and hike in June, but don't be surprised if it's the last, says MFR's Josh Shapiro. "A weakening labor market and an overall market fraying around the edges will keep the Fed on hold for the balance of the year before further weakness leads to easing moves in 2017."
    • Previously: Recession warning: Yield curve flattest since Dec. 2007 (May 18)
    • ETFs: SHY, BIL, PLW, VGSH, SHV, STPP, GOVT, SCHO, FLAT, FTT, EGF, SST, DTUS, TUZ, DTUL, TAPR, USFR, TFLO, RISE
    | Thu, May 19, 3:11 PM | 2 Comments
  • Wed, May 18, 8:57 AM
    • The spread between the yield on 10-year and 2-year Treasurys has fallen to just 94 basis points, that's down from 165 bps a year ago, and the slimmest margin since Dec. 2007.
    • As with the 2007 experience, most economists assure the yield curve isn't flashing a recession warning, but instead is reflecting goings-on having nothing to do with the economy. In 2016, it's overseas central banks and their negative interest rates to blame, says Deutsche's chief international economist Torsten Slok.
    • Money managers brush it off as well: “The bond market had better predictive powers in the past than it does now,” says Craig Brothers, who manages a $3B municipal bond portfolio.
    • Let's return in a year and see where things stand.
    • ETFs: IEF, PST, IEI, TYO, UST, PLW, DTYS, VGIT, STPP, GOVT, FLAT, TBX, SCHR, FTT, ITE, GSY, TYD, DTYL, EGF, DFVL, TAPR, TBZ, USFR, DFVS, TYNS, TFLO
    | Wed, May 18, 8:57 AM
  • Fri, Apr. 1, 2:56 PM
    | Fri, Apr. 1, 2:56 PM | 1 Comment
  • Tue, Mar. 22, 4:34 AM
    | Tue, Mar. 22, 4:34 AM | 4 Comments
  • Mon, Mar. 21, 1:10 PM
    • Just a few days after the FOMC slashed its forecast for the number of rate hikes this year, two Fed speakers today suggest the central bank could move as soon as its next meeting.
    • "There is sufficient momentum evidenced by the economic data to justify a further step ... as early as the meeting scheduled for the end of April," says Atlanta Fed boss Dennis Lockhart. “Short of some big shock that turns consumer psychology on its head, I see no reason why consumer spending growth should not continue."
    • Fed Fund futures have priced in a 7% chance of a boost in April, and a 38% chance of a June move.
    • Lockhart isn't a voter on the FOMC this year, but he's considered a middle-of-the-roader, so his hawkishness is of interest.
    • Earlier, San Francisco Fed President Williams said the economy is "looking great," and he expects April or June should work as potential dates for the next rate hike. He's also not a voting member of the FOMC this year.
    • ETFs: SHY, BIL, PLW, VGSH, SHV, STPP, SCHO, GOVT, FLAT, FTT, EGF, DTUS, SST, DTUL, TAPR, TUZ, USFR, TFLO
    | Mon, Mar. 21, 1:10 PM | 8 Comments
  • Tue, Mar. 15, 4:50 PM
    • Improving economic data suggest it's time for a tactical move into riskier assets, says BlackRock Chief Investment Strategist for Fixed Income Jeffrey Rosenberg.
    • He's moved his overweight position in one-to-three year government paper to neutral.
    • Short-term rate futures markets today are pricing in roughly one-and-a-half rate hikes this year vs. zero about a month ago.
    • ETFs: SHY, BIL, VGSH, SHV, STPP, SCHO, FLAT, DTUS, SST, DTUL, TUZ, USFR, TFLO
    | Tue, Mar. 15, 4:50 PM | 2 Comments
  • Wed, Mar. 9, 3:40 PM
    • The consensus view at the moment holds that policy divergence - in which most global central banks are easing while the Fed tightens - is unsustainable. Not so fast, says Goldman's Jan Hatzius. Even if the Fed hikes three times this year (which he expects), the wide gap between U.S. and overseas rates wouldn't be unusual on an historical basis.
    • A check of the scorecard finds the spread between U.S. and German two-year paper is the widest since 2006, and for the U.S. and Japan, the widest since 2008.
    • This just reflects the narrower-than-normal gap of the past few years, says Goldman. Go back further, and the divergence will be at about the post-1985 average even if the Fed boosts rates three times in 2016.
    • At the moment, short-term rate futures are pricing in only a 73% chance of even one Fed rate hike this year. Goldman not only expects three, but also sees the 10-year yield jumping all the way to 2.75% from the current 1.89%.
    • ETFs: IEF, SHY, PST, IEI, TYO, BIL, DTYS, UST, PLW, VGSH, SHV, VGIT, STPP, SCHO, GOVT, FLAT, TBX, SCHR, FTT, GSY, TYD, ITE, DTYL, EGF, DTUS, SST, DTUL, TAPR, TUZ, DFVL, TBZ, DFVS, USFR, TYNS, TFLO
    | Wed, Mar. 9, 3:40 PM
  • Tue, Feb. 23, 12:11 PM
    • Futures markets are showing less than a 50% chance of even one rate hike this year - that's down from 93% on Jan. 1. It's no surprise given the early rout in equities, troubles in China, and the continuing collapse in the energy patch.
    • But with stocks and energy showing signs of at least stabilizing, and inflation perking up, the central bank may not be as dovish as markets are pricing in, says BlackRock's Global Chief Investment Strategist Russ Koesterich.
    • "Will the central bankers wait out all of 2016," he asks in a new report. "Probably not."
    • An interesting counterpoint to Koesterich is from the Fed itself, where Dallas Fed boss Robert Kaplan today argues for an extended pause in the rate hike cycle.
    • ETFs: SHY, BIL, PLW, VGSH, SHV, STPP, SCHO, GOVT, FLAT, FTT, EGF, DTUS, SST, DTUL, TAPR, TUZ, USFR, TFLO
    | Tue, Feb. 23, 12:11 PM | 2 Comments
  • Tue, Feb. 23, 11:41 AM
    • Robert Kaplan continues to remind that there's a new, more-dovish sheriff in charge at the Dallas Fed.
    • Speaking to the FT, the Dallas Fed president says the central bank should be open to leaving policy on hold for an extended period, if necessary.
    • "I'd be concerned about the downside," he says, when asked about where the balance lay between positive and negative risks.
    • Alongside current issues, Kaplan also takes note of secular headwinds such as overcapacity, high debt levels, an aging population, and technological disruptions.
    • ETFs: SHY, BIL, PLW, VGSH, SHV, STPP, SCHO, GOVT, FLAT, FTT, EGF, DTUS, SST, DTUL, TAPR, TUZ, USFR, TFLO
    | Tue, Feb. 23, 11:41 AM | 7 Comments
  • Wed, Feb. 17, 10:19 AM
    | Wed, Feb. 17, 10:19 AM | 1 Comment
  • Thu, Feb. 11, 11:39 AM
    • In day two of her semi-annual testimony before Congress (today at the Senate), Janet Yellen repeated her prepared remarks in which she acknowledged rising risks, but reiterated her expectation for a gradual tightening of monetary policy.
    • "The Fed continues to be stubborn and dogmatic," says economist Bob Brusca. "Policy is not on automatic pilot it is on dogmatic pilot."
    • With Japan's going negative a couple of weeks ago, Sweden's deeper dive into negative territory last night, and deflation signs everywhere, rates below zero are the new big thing, and the Fed boss says the central bank is having a renewed look at them as a possible policy tool. Yellen is surprised, she says, at how far global central banks have been able to move into negative territory without seemingly affecting small depositors.
    • Live blog
    • As of this writing, the Jan. 2017 Fed Funds futures contract is trading slightly higher than the Feb. 2016 contract, meaning markets have not only priced out any chance of a rate hike this year, but they're now beginning to price in the possibility of a rate cut.
    • Previously: Treasury yields plunge to near 3-year lows (Feb. 11)
    • ETFs: SHY, BIL, PLW, VGSH, SHV, STPP, SCHO, GOVT, FLAT, FTT, EGF, DTUS, SST, DTUL, TAPR, TUZ, USFR, TFLO
    | Thu, Feb. 11, 11:39 AM | 22 Comments
  • Wed, Jan. 6, 9:06 AM
    | Wed, Jan. 6, 9:06 AM | 11 Comments
  • Dec. 17, 2015, 12:13 PM
    • Up at 2.34% in the immediate aftermath of the Fed's rate hike yesterday, the 10-year Treasury yield has slid all the way down to 2.24%. The two-year yield is off one basis point to 0.99%.
    • Today's 2-10 spread of 135 basis points compares to about 151 basis points in early November.
    • TLT +1%, TBT -2%
    • Yield curve ETFs: STPP, FLAT
    | Dec. 17, 2015, 12:13 PM | 11 Comments
FLAT Description
"The iPath® US Treasury Flattener Exchange Traded Note is linked inversely to the performance of the Barclays Capital US Treasury 2Y/10Y Yield Curve Index™. The index employs a strategy that seeks to capture returns that are potentially available from a ""steepening"" or ""flattening"", as applicable, of the U.S. Treasury yield curve through a notional rolling investment in U.S. Treasury note futures contracts. The level of the index is designed to increase in response to a ""steepening"" of the yield curve and to decrease in response to a ""flattening"" of the yield curve. To accomplish this objective, the performance of the index tracks the returns of a notional investment in a weighted ""long"" position in relation to 2-year Treasury futures contracts and a weighted ""short"" position in relation to 10-year Treasury futures contracts, as traded on the Chicago Board of Trade. The iPath® US Treasury Flattener ETN employs an index multiplier that provides the investor at maturity or upon redemption a participation rate of $0.10 gain or loss per each 1.00 point decrease or increase, respectively, in the level of the index. For purposes of calculating the closing indicative note value on a given day, the index multiplier is multiplied by the daily index performance, which is added to the daily interest that accrued from a notional investment of the value of the ETN at the 28-day U.S. Treasury Bill rate, from which all applicable costs and fees are deducted. "
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