iShares Lehman 7-10 Year Treasury (IEF)

All Comments on IEF

  • commenter
    zooey
    Aug 28 01:26 PM
    The Yield Curve and Investor Sentiment (Part III) [view article]
    Your attempt to correlate the curve to sentiment is not new or very useful since the exceptions are so numerous and well known. In general the things driving bond values are the liquidity differential between treasuries and investment grade bonds, and the short end is pushed around by the lack of markets for commercial paper, and bank credit facilities. Knowing that I think putting much faith in the choices made by investors is nonsense. In a fully function market in more normal times your speculations might be worth considering. As it is now you are just playing word games. Reply
  • commenter
    Japan20000
    Aug 28 02:37 AM
    The Real Secret to Fractional Banking [view article]
    I am not an expert in finance nor a graduate in any of connected disciplines, but some comments here baffle me by basic ignorance.
    JasonC already addressed most of points I wanted to add, but I still want to summarise:
    1) no, you cannot just take a 3% loan and do nothing with it even if inflation is 10%. You will still have to earn at least nominal 3% somewhere to be able to repay. So nomilal yield does matter
    2) gold can go down when iflation is high.
    These are 2 sure comments, and one more a bit speculative:
    3) I suspect much of investment into treasuries is due to funds (such as pension) funds who must have a certain % of their money invested in high quality debt, so they do it even when their managers wouldn't personally buy any for themselves. This pressures the yields artificially as does politics - I think one of the reason the Fed sticks to a low rate is exactly for the state to be able to borrow at low cost.
    Do people here agree to this one?     Reply
  • commenter
    dieuwer
    Aug 27 07:28 PM
    The Yield Curve and Investor Sentiment (Part II) [view article]
    The yield curve has been contracting since mid March. There is a danger of inverting. Reply
  • commenter
    JasonC
    Aug 27 03:34 PM
    The Real Secret to Fractional Banking [view article]
    Let's repeat the trend follower's catechism, shall we?

    Why would anyone own anything declining in price? Obvious anything declining in price is not paying you but costing you, yet you tie up capital in it. It should be sold instantly because it is declining in price. Anything declining in price is worth zero if not less.

    Anything rising in price is sure to continue rising in price at least as fast as it just did. If you can borrow anything at rates below the rate it is rising, then just add enough leverage and your net worth will increase as fast as you desire. Anything rising in price higher than prevailing loan interest rates is therefore worth infinity. It should be bought instantly on the highest possible leverage.

    There. Fixed it. That is all the thought there is in this silly screed. And the flaw is?

    What the asset did over the last year has essentially nothing to do with what it will do over the next year. And in particular, the more is went up last year the more overvalued it is becoming, and the more it went down the more undervalued it is becoming - perhaps. Even that - the level trader's view - isn't remotely certain because the real future long run average price of anything changes all the time and is not known.

    Here is the next thing wrong with it - one can sell, all cannot. Every asset is owned, and at all times, and precisely once. Assets owned with leverage require someone else passing on owning that asset at its current price, in favor of a fixed debt claim against the holder who uses leverage. Assets shorted have an extra long who took the other side of the trade, on top of all the existing longs. The aggregate return realized by all investors will be the return of every asset times its quantity, and all the trading in existence can't move it one iota.

    Why are treasuries so bid? Because they have no credit losses and every other bond market item does, at present. Meanwhile every equity claim stands junior to others that are already distressed. Banks are also bidding for treasuries because they have zero Basel II reserve requirements, while riskier assets require regulatory capital against them. Said capital is scarce because they lost lots of their equity on bad real estate loans etc.

    If you think rates are insanely low you should go take out a big loan, regardless of terms, against a valuable real asset. Oh, guess what the real estate bubble *was*? Too many people having exactly that brainstorm at once, ignoring the little question of the actual price paid. No Virginia, the house is not certain to always be worth much more than the piece of paper written against it. Something the despised piece of paper with its little nominal 6% yield is worth so much more than the big honking real house, that the holder of said paper will come kick you out of said house. No, leveraged debt to finance supposedly appreciating real assets is not a guaranteed way to get rich quick off the feckless make-believe of the fiat money system. Those who thought so are now called "bankrupts" and "renters"...     Reply
  • commenter
    User 52095
    Aug 27 03:18 PM
    The Yield Curve and Investor Sentiment (Part II) [view article]
    Where does normal begin and end?

    Where does steep begin?     Reply
  • commenter
    The Cynic
    Aug 27 12:39 PM
    Credit Spreads Continue to Get Worse [view article]
    How much does the current spread exceed that which existed at the Bear Sterns debacle? Reply
  • commenter
    johnthebear
    Aug 27 12:06 PM
    Wednesday Outlook: Low Volume Storm? [view article]
    David, did you ever figure out how the 2:1 double shorts work in IYR/FXI etc?

    I would appreciate your thoughts.

    Thanks for your research and great graphs. John     Reply
  • commenter
    Pickings
    Aug 27 11:13 AM
    Credit Spreads Continue to Get Worse [view article]
    Is this spread data available in charts online? If so, where? Reply
  • commenter
    adan lerma
    Aug 27 11:06 AM
    My Website
    The Real Secret to Fractional Banking [view article]
    really interesting article -

    in your future extensions of the subject, i'd also like your thoughts on the idea that inflation eventually usually leads to deflation

    and how that might explain why some people feel it's worth having some $ in longer term bonds

    it seems that the two forces, inflation and deflation, are both extremely active on different asset classes right now

    and monetarily, credit is being reduced/destroyed, a deflationary trend; while food and energy, til recently, were skyrocketing

    might one be lagging the other?

    i myself am not predicting anything, but obviously concerned enough to be trying to watch what's happening, including interesting articles such as yours
    Reply
  • commenter
    adan lerma
    Aug 27 09:53 AM
    My Website
    Wednesday Outlook: Low Volume Storm? [view article]
    w/deflation, bonds would be good, at least for awhile - good info on your charts, as usual :-)

    thanks!     Reply
  • commenter
    Nidhi
    Aug 27 09:41 AM
    My Website
    The Yield Curve and Investor Sentiment (Part II) [view article]
    The link below shows how stock markets have responded to variations in bond yields ...

    creating-wealth.blogsp...
     Reply
  • commenter
    adan lerma
    Aug 27 09:00 AM
    My Website
    The Yield Curve and Investor Sentiment (Part II) [view article]
    really like the basic info, hope it continues in complexity

    gotta recommend my favorite bond site right now: across the curve
    acrossthecurve.com/

    also has great info in varying detail

    thanks!     Reply
  • commenter
    tvb
    Aug 27 06:19 AM
    The Real Secret to Fractional Banking [view article]
    You have to use overall inflation to calculate real rates, not cherry-pick the most appreciated asset classes of the past year (e.g. gold). If you are going to arbitrarily chose an asset class to calculate real rates, try using the deflated housing prices of the past year. Makes just as much sense as using gold (none). You could have made your same arguments a year ago -- and those who invested in 10 year treasuries last year (at around 5% yields) made substantial returns -- particularly compared to those who lost tons in the equity (around 20% from the peaks) and housing markets. I'm not saying that treasuries are attractive now (I don't think that they are), but your analysis is flawed. Reply
  • commenter
    phdinsuntann
    ing
    Aug 27 05:59 AM
    My Website
    Wednesday Outlook: Low Volume Storm? [view article]
    at least we know you are long IEF,
    agreed, no interest rates risk yet     Reply
  • commenter
    zooey
    Aug 26 07:35 PM
    Credit Spreads Continue to Get Worse [view article]
    Does this surprise someone? I hope not it seems to have been unavoidable since banks lost a lot of their liquidity. This is not so bad as it seems; it sobers up the borrower and discourages the marginal deals. It also cuts employment by the small firms who are shut out. In the end it results demand destruction via lost jobs. More ugliness to go, much more. Reply
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