CHART OF THE DAY: What The Bond Market Sell-Off Looks Like On A 222-Year Chart
Posted on 05/29/2013 1:27:27 PM PDT by blam
The Treasury Bond Selloff Is 'For Real' And The Volume Is Gigantic
Matthew Boesler
May 29, 2013, 2:05 PM
It's been a crazy few weeks in the Treasury bond market.
After a big rally that began in mid-March, amid the outbreak of the Cypriot financial crisis and fears over a slowdown in global growth, Treasuries have given up all of their gains, and bond yields are now rising to the highest levels in over a year.
This morning, the yield on the 10-year U.S. Treasury hit a high of 2.23%.
Naturally, there is a lot of debate over where yields go next. Goldman Sachs, one of the prominent shops calling for higher yields, has published a call saying the sell-off in Treasuries is "for real" this time.
Despite hitting a high of 2.23% earlier, yields have since backed down to 2.15%, and bonds are now positive on the day.
And amid the wild price action, we're seeing a massive amount of trading in the market.
Yesterday, trading volumes in the Treasury futures market on the Chicago Mercantile Exchange rose to an all-time high.
"CME Group's Treasury complex also experienced record volumes yesterday in the 10-Year U.S. Treasury Note futures (4,216,687), the 5-year U.S. Treasury Note futures and options (2,994,162), and the 2-Year U.S. Treasury Note futures and options (1,929,500)," said the CME in a release.
Today, with bonds slightly in the green, it looks like the market is on pace to break the record yet again.
Brean Capital Head of Rates Russ Certo passes along some trading volume information in the cash market as of 1:30 PM – $32 billion have traded in 2-year Treasuries, $80 billion in 5-years, $29 billion in 7-years, and $72 billion in 10-years.
(snip)
(Excerpt) Read more at businessinsider.com ...
Looks like we have a ways to go to hit bottom (inverting the red chart).
That’s an absolutely fascinating chart! I’ve been studying on it for about 20 minutes looking for a correlation between bond and stock action; can’t really find one, they seem to diverge as much as they correlate, i.e. sometimes bonds dip/stocks rise; sometimes the other way round.
Also of note, that bonds appear to have been relatively stable until 1921. Then, after the war, which is when the Dollar became the world’s reserve currency, replacing the British pound, volitility really took off; and then the inflationary period of the seventies/80’s seems to correspond with Nixon going off the gold standard to a total fiat currency model. Still, (and assuming I’m reading this right), the chart doesn’t seem terribly predictive. It would be great to see a similar chart for the British markets because we could see what’s in store for us if the Dollar is abandonned/replaced as the worlds reserve currency!
Bump!
Ben put out the call for for certain people to buy and bring the yield back down. Probably even supplied the funds to buy them. He can fix this until he can’t.
ping
--and it doesn't matter. What matters is something the article totally missed; namely, federal outlays for debt intererest. Here's what our taxes have been paying for the national debt interest outlays:
--and it tells us that right now our interest payments are no big shakes. In fact, interest payments now are even less than they were during the Clinton wonderful miracle economy. Here's the problem, interest rates are low now. This graph is the total average interest rate the US gov't is paying on the national debt:
The 50 yr. aveage rate's been 4.2%, about three times what it is now. That means our debt interest payments will probably soon be more like a $trillion per year. We'll have to choose from three choices: eliminate all discretionary spending, double our taxes, or default.
Or inflate or a combination.
I would trace it back to the creation of the Fed.
This will be the end of cheap morrtgage rates!
yeah, they’ll probably use a combination plus inflation which postpones the pain until interest rises to compensate.
Maybe they will get themselves a nice little exogenous event to blame the inflation on.
Sure, it doesn't seem that this level of spending is sustainable, but hey, we've sustained it for four years now so why not 40 years?
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