Posts Tagged ‘Treasury bonds’

Notes From Underground: The markets owe its movements to DEBT, DEBT, DEBT

November 15, 2010

Today’s markets were all about DEBT. The European sovereign DEBT markets were rife with rumors about Portugal, Greece and Ireland all defaulting, which would lead to a restructuring or some other type of sovereign DEBT relief. It was rumored that Portugal was dropping out of the EURO altogether. All the rumors forced Chancellor Angela Merkel to say that the EURO was the glue that holds Europe together and that Germany would do its part to hold the EU together and that countries in trouble would be provided with the needed funds.

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Notes From Underground: Bad data from Philly and the jobless claims surge to more than 500,000

August 19, 2010

The news on the economic front is tepid at best, which has given rise to the long end of the treasury market. As the BOND and NOTE futures continue to rally, the airwaves are full of talk about a bubble in the fixed income market. We don’t think a BUBBLE is forming, but what is happening is that many HEDGE funds overstayed their welcome on the 2/10 steepener. The steepener trade was a great trade as the FED pushed rates down on the front end to help aid the Banks in their profitability in a very uncertain credit market. (This was the same policy that the FED used back in the early nineties when the FED eased the pain of theĀ banks, and Savings & Loan crisis. It created a very steep curve.) The FED did it again beginning in 2007 as the current DEBT crisis unfolded and the BOND VIGILANTES pushed the 2/10 curve out to more than 280 basis points, which provided banks with an easy profit center to help shore up its balance sheets. Of course bank profits came out of the pockets of anyone who had savings in short-term money instruments.

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