iBankCoin
18 years in Wall Street, left after finding out it was all horseshit. Founder/ Master and Commander: iBankCoin, finance news and commentary from the future.
Joined Nov 10, 2007
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Credit Suisse: The Secular Downtrend in Yields is Over — Let the Chimp Out Begin

David Sneddon, global head of the church of technical analysis, Credit Suisse, is out with some news this morning. The secular downtrend in yields is officially over. As such, expect the US 10yr to jimmy-rig higher from the present 2.85% to 3-3.05%.

Additionally, should yields break higher from these seemingly magical levels, well then, you should prepare yourselves for a most dire and grim bond bear market — one sporting real yields of the frightening varietal.

In recent weeks, markets have responded unkindly to spiking bonds yields. The rationale, of course, is higher growth begets higher yields — dictated by market forces, buoyed by the Federal Reserve. However, according to the Fed’s mandate, yields should only be going higher if inflation is a risk to the economy. By all measures, the CPI is anything but hot — thereby ruining any intellectual debate for higher rates or higher inflation.

Ergo, this move higher in yields, although relevant and powerful, is a farce.

Personally, I am short bonds 3x, as more of a black swan trade. I do not believe yields should spike, but I believe they might — as a mode to apply pressure on markets. This is yet another pain trade taking place. Let’s see if it unfolds or not.

Related:

CNBC

Fund managers have sliced their bond allocations to the lowest level in 20 years as fears grow that the sector poses the biggest threat to markets.

Along with reducing their fixed income exposure, 60 percent of professional investors also say inflation and troubles overall in the bond market pose the biggest threat of a “cross-asset crash,” according to the February Bank of America Merrill Lynch Fund Manager Survey.

Respondents say they’ve reduced their bond portfolios to a net 69 percent underweight, the lowest since the survey began two decades ago. The survey polled 196 panelists with $575 billion in assets under management.

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14 comments

  1. natehois

    I don’t think it will unfold ultimately, stocks and bonds rarely trade in parity. Just my .02 BTC.

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  2. Po Pimp

    Fuck those cuckoo clock makers. We should let zeee Germans roll through their shit hole country and wreck shop.

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  3. roundwego

    Their is no market without trust. The leadership are failing and the followers are lost and revolting.

    https://www.zerohedge.com/news/2018-02-13/whistleblower-exposes-rampant-manipulation-vix

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  4. sarcrilege

    Cunole clown station CNBC and their cuckahead cuck guests are always out there to muppet the gullibles. Pretty good bet Sneddon is positioned for lower yields trades.

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  5. jsal56

    Dailo deserves the benefit of the doubt?

    Why was Dalio coming to Comey’s defense in a very public way?

    Why would a hedge fund manager have contact with the Head of the FBI?

    http://fortune.com/2017/05/10/james-comey-fired-bridgewater-ray-dalio/

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  6. Lyndon Keltner

    Crude and Jap Yen are suggesting the bears can still do more damage.

    FWIW, I got some bids from $58.50 down to $57 on crude for a bounce.

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  7. Fidel Cash Grow

    Fly – if you haven’t already, check out the podcast “Business Wars.” First few episodes focus on Netflix versus Blockbuster in the early/mid 2000’s. It’s great so far – Ichan was such a dick and Reed Hastings is clearly autistic.

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  8. Cricket

    The US is about to enter the greatest period of real growth since the early 1960’s.

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  9. numbersgame

    “Personally, I am short bonds 3x, as more of a black swan trade. I do not believe yields should spike, but I believe they might — as a mode to apply pressure on markets. This is yet another pain trade taking place.”

    I think you got this backwards. Treasuries are heavily **shorted** right now, meaning that any interest rate spike won’t be up, but will be dropping down through the skulls of of Treasury bears as they desperately cover.

    https://www.zerohedge.com/news/2018-02-10/traders-now-record-short-bonds-after-biggest-vix-futures-liquidation-ever

    Last week, the FED sold ~$11B worth of bonds, their largest sale in several years. That may be small compared to the overall Treasuries market, but as a comparison, TLT only has $7B in assets.

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