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BONDS: A Great SHORT Trade for 2013? Late 2016?

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BONDS /
Headline: T-Bonds A Great SHORT Trade for 2013 ... And 2016*? Go to Page 4
BONDS look like they may be set for a breakdown... to below key support at TLT-$120
===========================================
( Link to here: http://tinyurl.com/GEI-Bonds ) ... All Data

TLT / 20yr Bond etf. ... update : 5yrs-TLT : 6mos-TLT : 10days : Latest-TLT
tlt.gif

Updated 11/23/2015:

TLT-all_zpsfc0bo8nv.gif

 

*(2013 was a good year to be short - "... and 2016") was added 11/24/2015

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Would a Bust in Bonds, finally bring some Good news for Gold Bugs?

 

(they are getting hit by negative sentiment recently):

 

MARK DOW: Here's Why The Gold Trade Is Finally Going Bust

 

Basically goes like this: It used to be that everyone was SURE that QE would cause inflation to boom. They piled into gold, even though that assumption was flawed.

Now the mentality is working in the reverse. People believe QE is ineffective, right as monetary policy is starting to gain some teeth and actually work.

===

Read more: http://www.businessi...2#ixzz2FP5psfGU

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TLT/Bonds could have started a very meaningful breakdown YESTERDAY !

 

Bonds look like they may be set for a breakdown ... update

 

tlt.gif

 

TLT- 120 was tested on big volume , and held (so far), but the Trendline was broken:

 

TLT : 120.51 -1.24

Open:121.40 / High:121.78 / Low: 119.90 .. Volume: 11.88 million

Percent Change: -1.02%

 

What is very interesting indeed, is the way that Stocks (SPY) and Bonds (TLT) have mirrored each other

in a rising uptrend, indicated by the 200d MA - over the last 3 years.

 

TLT / Bonds vs. SPY ... TLT-vs-SPY : SPY-vs-TLT

tltvsspy.gif

 

Trading Signals - what wonderful trading opportunities are here !

You can "stay in a trade" the whole time, because when you sell one, you buy the other - thnx to mirroring

 

tltvsspy.gif

 

A sign of a possible Breakdown is that the latest TLT-Sell came at a lower level than the last one.

So that may mean a TLT top is now in place ! A fall to maybe TLT-110 or lower looks likely now.

 

Stocks may rise as bonds fall, but not necessarily. To put that in perspective, I need to look back more than 3 years.

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Stocks may rise as bonds fall, but not necessarily. To put that in perspective, I need to look back more than 3 years.

 

Here's 5 Years History ... update

tlt5yr.gif

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TLT is still holding above 120...

 

TLT : 122.25 +1.32

Open: 122.31 / High: 122.43 / Low: 121.95

Volume: 5,648,513

Percent Change: +1.09%

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Banks may find it more difficult to get/keep deposits in 2013

And that may leave them with less money to invest in TBonds

 

Major borrowers to reduce bank deposits -Fed survey

Reuters UK - 6 Hours ago

6:59pm GMT WASHINGTON, Dec 27 (Reuters) - Wall Street dealers expect hedge funds, insurance companies and other borrowers to reduce deposits at commercial banks when a financial crisis-era deposit insurance

=== ===

 

Some folks are now turning Bearish on Bonds.

Such as...

 

Paul Craig Roberts:

 

The Fiscal Cliff Hoax - Our Collapsing Economy and Currency

Submitted by Paul Craig Roberts on Sat, 12/15/2012 - 14:23

fiscalcliff.jpg

 

Is the “fiscal cliff” real or just another hoax? The answer is that the fiscal cliff is real, but it is a result, not a cause. The hoax is the way the fiscal cliff is being used.

The fiscal cliff is the result of the inability to close the federal budget deficit. The budget deficit cannot be closed because large numbers of US middle class jobs and the GDP and tax base associated with them have been moved offshore, thus reducing federal revenues. The fiscal cliff cannot be closed because of the unfunded liabilities of eleven years of US-initiated wars against a half dozen Muslim countries–wars that have benefited only the profits of the military/security complex and the territorial ambitions of Israel. The budget deficit cannot be closed, because economic policy is focused only on saving banks that wrongful financial deregulation allowed to speculate, to merge, and to become too big to fail, thus requiring public subsidies that vastly dwarf the totality of US welfare spending.

===

/His Blog: http://www.economicp...t.org/blog/1077

Edited by DrBubb

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Bonds are still holding up - But for how much longer ??

 

There has been a CLOSE relationship between TLT and SH (the inverse of SPY)

 

TLT-vs-SH / Bonds vs. Inverted Stocks ... update : 12mos

 

tltvssh.gif

 

Nothing is written in stone saying that this close relationship will be maintained.

Bonds are stocks could go in the same direction (Down!), if the US goes off the Fiscal Cliff.

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Doug Noland: Historic Global Credit Bubble Is Forming

 

Trillions flowing into bond funds at major risk

 

picture-722.jpg

 

NEWSHOUR, GUEST EXPERT25/Dec/2012 fs-insider.png

This Financial Sense Newshour program is available only as a premium, paid "FS Insider" release.

Jim is pleased to welcome back Douglas Noland, Senior Portfolio Manager at Federated Investors Inc. in Boston. In Europe, Doug believes the ECB will continue to do whatever it takes to bring down the credit spreads among EU member countries, which is helping to create a global credit bubble. Doug sees a major battle in the credit markets between the central banks and the bond vigilantes. The central bankers now have the upper hand, but Doug believes this will not last. Trillions are flowing into bond funds, which he sees as a major risk for investors. He believes that we are entering into a critical “end game” in the inflationary cycle, as central bankers continue to take desperate measures to prop up slowing economies around the globe

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2012 In Review / Doug Noland... Dec. 28, 2012

 

abbaj.jpg

 

“Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.” Mario Draghi, president of the European Central Bank, July 26, 2012. Having singlehandedly altered the course of the European crisis, the Financial Times named Mr. Draghi “FT Person of the Year.” Yet “Super Mario” was anything but acting alone. The emboldened Bernanke Fed soon followed Draghi’s bold pronouncement with its own daring commitment to open-ended quantitative easing (in a non-crisis environment!). All throughout 2012, extraordinary monetary easings were announced by central banks around the globe. I will this evening announce the distinguished 2012 “CBB Thing of the Year” recipient: congratulations to Endless Free “Money."

. . .

Despite ultra-loose monetary policies around the world, global growth slowed meaningfully in 2012. Economies throughout Europe downshifted forcefully. Importantly, 2012 saw the crisis gravitate from Europe’s periphery to its core. German growth slowed from 2011’s 3.1% to less than 1% (OECD estimates 0.9%). France flat-lined after 2011’s almost 2% expansion. The Italian economy nosedived, from slightly positive growth (0.6%) to a contraction of 2.2% (OECD estimate). Spain also saw positive GDP (0.4%) succumb to recession (negative 1.3%). But it was the worsening of already alarmingly high unemployment that best illustrated Europe’s unfolding recession/depression. Spain’s unemployment rate jumped to 25% (up from less than 21% in mid-2011). Italian unemployment surpassed 11%, with France following closely behind at 10.3%. The overall eurozone unemployment rate jumped to 11.7% (as of October), from 10.0% in mid-2011. Worse yet, the region’s youth unemployment rate remained shockingly high.

. . .

As an analyst and student of Credit, I remain in awe of Credit happenings in China. First of all, Chinese economic growth also slowed meaningfully in the face of ongoing historic Credit expansion. According to Reuters, total bank lending has been on course to approach $1.4 TN, an increase of almost 14% from booming 2011. Even more amazing is the growth of non-bank Credit. According to Bloomberg, Chinese corporate debt issuance surged 54% in 2012 to $657bn. Moreover, some analysts have estimated annual growth as high as 50% for lending outside of China's normal banking channels. According to Barclay’s, the Chinese “‘shadow banking’ industry has nearly doubled in the past two years to $4.11 trillion, or more than a third of total lending.” While a complete and accurate accounting of Chinese Credit is not available, it is possible that total 2012 Chinese Credit growth approached the U.S. record of $2.5 TN posted in 2007. I have posited that Chinese authorities lost control of their Credit boom back during the aggressive 2009 stimulus period. I have similarly suggested that China is trapped in a late-cycle “terminal phase of Credit excess.” I saw only support for this thesis in 2012.

That historic Chinese Credit growth actually accelerated from 2011 levels – and that minimally regulated, high-risk and opaque “shadow banking” Credit exploded – is an important aspect of my “right tail” (Bubble grows much more precarious) year-in-review 2012 analysis...

. . .

According to Bloomberg (Sarika Gangar), global corporate bond sales this year just surpassed 2009’s record $3.89 TN. “Companies from the neediest to the most creditworthy took advantage of borrowing costs that fell to a record-low 3.27% this week as central banks held down interest rates to prop up the economy… Investors also funneled $475.3 billion into bond funds as global growth, which slowed to an estimated 2.2% this year from 2.91% in 2011, prompted them to seek alternatives to equities.” The first, third and fourth quarters all posted record issuance for their respective periods. “The yield on bonds worldwide fell 1.56 percentage points this year… Borrowing costs have tumbled from an all-time high of 9.05% in October 2008… Issuance in the U.S. reached a record, climbing 31% to $1.47 trillion, exceeding the previous all-time high of $1.24 trillion in 2009… Sales of high-yield bonds… reached $354 billion. That’s 23% above the previous record of $288 billion set in 2010.” According to Forbes’ Steve Miller, U.S. leveraged loans jumped 24% from 2011 to $465bn, with lending volumes below only 2006 and 2007 levels.

 

Instead of the forces of de-risking/de-leveraging, Credit instruments enjoyed manic demand. It is worth noting that 2012’s record $475bn bond inflows compares to 2011’s $99bn. A virtual buyers’ panic ensured double-digit returns for corporate debt investors. And the riskier the paper, the higher the 2012 return.

===

/more: http://www.prudentbe...ew?art_id=10743

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Global Bubble Watch:

 

December 27 – Wall Street Journal (Patrick McGee): “Bond investors willing to take on more risk in 2012 got their reward. Among major fixed-income picks, high-yield, or ‘junk,’ bonds were the best performing this year, notching total returns of 16% through Monday, according to Barclays… Efforts by the Federal Reserve, led by Ben Bernanke, to keep long-term interest rates low by pumping money into the economy pushed yield-seeking investors into the debt of companies rated below investment grade… Investment-grade corporate bonds handed investors returns of 9.6%... Treasurys returned 1.8%. The rush into junk bonds sent yields, which move in the opposite direction of bond prices, tumbling. Yields touched a record low 6.1% last week, compared with 8.1% at the start of 2012…”

 

December 27 – Bloomberg (Aaron Kirchfeld and Serena Saitto): “Global mergers and acquisitions rose to the highest level in four years this quarter… Companies worldwide have announced $691.9 billion in purchases in the final three months of the year, the most since the third quarter of 2008… While transactions for all of 2012 shrank about 10% to $2.19 trillion, the same level as 2010, about $86 billion of telecommunications deals… gave the end of the year a boost.”

 

December 24 – Dow Jones (Tatsuo Ito): “Faced with strong political pressure, the Bank of Japan is resorting to an ‘unprecedented’ lending program in the hopes it would rein in the yen’s strength, but combined with aggressive monetary easing, the move risks inviting resentment from other countries. The central bank Thursday announced the details of the program in which the BOJ provides cheap funds to commercial banks in return for an increase in their loans, an attempt to pump more money into the real economy. But in a rare admission they were also targeting the currency's value, BOJ officials said they hoped it would spur money flows overseas and bring about a weaker yen. ‘If firms using the scheme convert the yen into foreign currencies when they increase their M&A activity globally, that would strengthen money flows that correct the yen's strength,’ BOJ Gov. Masaaki Shirakawa told a news conference… after the central bank also decided to increase its purchases of government debt by Y10 trillion ($119bn). The governor said the program was an ‘unprecedented’ step for central banks in that it allowed banks in Japan to use the money from the BOJ for lending to non-Japanese firms overseas, including hedge funds, and in foreign currencies.

 

December 24 – Bloomberg (Christine Idzelis): “Loans made to the neediest U.S. companies rose to the most in five years, as investor demand for the debt with the highest claims on a borrower’s assets grew amid a struggling global economy and fiscal uncertainty. Speculative-grade borrowers raised more than $315 billion of the debt from collateralized loan obligations and hedge funds, exceeding 2011 levels and the most since $388.3 billion was issued in 2007, data compiled by Bloomberg and JPMorgan Chase & Co. show… ‘The market is red hot,’ Richard Farley, a New York-based partner at law firm Paul Hastings LLP who focuses on leveraged finance, said… ‘I don’t think there’s anything that will knock us off the horse at this point.’”

 

December 21 – Forbes (Steve Miller): “U.S issuers printed $465 billion of new leveraged loans in 2012, 24% more than in 2011… That’s the third-biggest year of primary loan production, behind 2006 and 2007. The market has been especially hot in the fourth quarter, amid a largely stable macro environment and demand-rich technical conditions. All told, new-issue loan volume climbed to $136 billion during the final three months of 2012 – the most since the first quarter of 2011, when quarterly activity reached a post-credit-crunch high of $141 billion – from $126 billion in the third quarter.”

 

December 26 – Bloomberg (Matt Robinson): “Standard & Poor’s and Moody’s Investors Service are cutting corporate debt ratings at the fastest pace since 2009 as a global economic slowdown and record borrowing erode credit quality. The ratio of ratings downgrades to upgrades worldwide climbed to 1.85 this year from 1.23 in 2011…”

===

/see: http://www.prudentbe...ew?art_id=10743

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Bubb,

 

I have been thinking the last few days about this in relation to the UK gilt market. QE has led to a dislocation driving down yields and pushing up bond prices. My view is this will be maintained while the BOE is in the market. BOE currently owns 32.4% of gilts and following the UK predicted borrowing figures (similar to OBR figures) by 2016/17 the BOE will own more than half of all gilts issued by my estimation. Not a problem in itself. I have come to the view recently that QE is simply fiscal stimulation through printing, entirely to create inflation and keep rates down to prevent asset price declines to stop a deflationary doom spiral. At present it is working though it is gradually beggaring the population in my view which means it is a race between inflating the currency to catch up with overinflated asset (house) prices and not annihilating the common man to the point of rioting. My long term view through this remains: hold something other than sterling/US dollar/Euro/Yen. (Gold but looking at other options). In my view governments will do whatever is easy. Currently the BOE is simply giving the coupon payments back to the treasury and I suppose they will either cancel the bonds or let them expire far off in the future.

 

I guess I like many people was wrongfooted by the move in bonds. Its almost a paradox really that the central bank buys gilts with freshly printed paper and the more it does it the higher existing bond prices rise and the lower yields become. That only works with the cooperation and existence of the market IMO. Thus are limits to how far this can be pushed.

 

The way i see it is that the only thing that matters is when the BOE leaves the market and removes fake demand (voluntarily or not). From that moment on, either gradually or suddenly the dislocation will close as the market sets true value and risk for gilts. This means an inevitable increase in interest rates and a reduction in bond prices. Whether the BOE can leave the market as effortlessly as it entered I don't know.

 

Shorting bonds has been tried many times in the past with no success, and timing is no doubt the crucial thing.

 

Things I will be keeping an eye on are: yields for different issues (available from BOE), Long/Short data, breakdown of holders of gilts by type (BOE, Insurance/pensions, Banks!, foreign)

 

The data from Q3 2008 onwards is very interesting from the BOE. There has been a more than doubling of the national debt over that time. Pensions and foreign holders increased there holdings a little. The BOE bought 375bn. Banks bought 468bn in the same time frame, with buying going from nil upwards 1Q before QE formally began.

 

Watching what the commercial banks holdings and the yield rates may give an indication when the worm is turning (and an indication to perhaps rotate out of gold).

 

GB

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Bubb,

...Its almost a paradox really that the central bank buys gilts with freshly printed paper and the more it does it the higher existing bond prices rise and the lower yields become. That only works with the cooperation and existence of the market IMO. Thus are limits to how far this can be pushed.

 

The way i see it is that the only thing that matters is when the BOE leaves the market and removes fake demand (voluntarily or not). From that moment on, either gradually or suddenly the dislocation will close as the market sets true value and risk for gilts. This means an inevitable increase in interest rates and a reduction in bond prices. Whether the BOE can leave the market as effortlessly as it entered I don't know.

Yes.

"It only works with the cooperation of the market."

But market so far has learned not to "fight the Fed", or to fight the BofE - since that has been a great way to lose money.

 

Here's a question: How can the Fed or BofE stop adding "artificial demand"?

I don't really see any way out that does not involve massive inflation and/or a crash.

The money printing countries are on a dangerous road, A Road to Perdition.

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Excellent point bubb.

 

Again originally i thought that the BOE cannot leave the market without an uptick in yields and that such a situation would trigger selling from savvy bond holders who knew that prices could only go one way, and perhaps create a flight from sterling.

 

The bank can patently never sell its holdings but what happens if it gradually reduces its buying of new issues. In my mind this must be a slow and poorly signalled non linear process actively managed by the bank.

 

Foreign central banks and pensions may not sell.

 

My assumption is that if the the bank know that qe must be temporary otherwise sterling is destroyed. Given this is a western coordinated approach is this actually true?

 

QE has so far generated 375 billion new dosh. Last year 7.9% of gdp magicked into existence. A lot but what is 120billion compared to total narrow money. Especially in the context of much slower total credit market debt growth and lowest ever money velocity. My view is controlled inflation is exactly what they want to devalue western currencies and attempt to restart a credit boom.

 

If the fed cant leave the market and is openly monetizing a one trillion dollar deficit why are you considering shorting treasuries? :)

 

I would say the only reason banks have bought up 468 billion gilts is not for charity or yields. It is to sell those bonds for a profit. Why else hold bonds now?

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How bonds finished the year 2012 ... TLT- 10d-update : 6-months

 

tlt10d.gif

 

 

TLT : 121.18 -2.13

Open: 122.87 / High: 122.97 / Low: 120.911

Volume: 6,421,818

Percent Change: -1.73%

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TLT today: 119.05 -0.51/ -0.43%

 

A BOND DOWNTURN / rate rise in the UK too?

 

OK, wisper it quietly, but I reckon that having hit a rock bottom double-bottom in mid-2012, UK Government borrowing costs are now on an UPWARD trajectory:

 

http://postimage.org/image/qguu55as1/

UK_10yr.png

 

update: http://bigcharts.mar...=false&state=11

 

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BONDS: Even lower (TLT: $117.94 -1.62 / -1.35%)

... on News:

 

Fed minutes show some concerns on bond purchases

Miami Herald - 5 Hours ago

WASHINGTON -- Federal Reserve policymakers expressed broad support last month for the Fed's plan to buy bonds to support the U.S. economy. But they differed over how long to keep buying bonds to drive

 

A new Trend - Rising Rates - seems to be establishing itself:

 

TNX / 10 Year Treasury Note Yield Index ... update / 10yr now at: 1.90%

 

tnx.gif

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Fed minutes show some concerns on bond purchases

Miami Herald - 5 Hours ago

WASHINGTON -- Federal Reserve policymakers expressed broad support last month for the Fed's plan to buy bonds to support the U.S. economy. But they differed over how long to keep buying bonds to drive

 

 

Not everyone supports it. Here's Harvard Professor Martin Feldstein writing in the WSJ:

 

The Fed's Dangerous Direction - by Martin Feldstein

 

Key Points:

===

+ "Unconventional" monetary policy is creating bubbles in asset markets

+ $85 Billion per month, may keep 10 year yields near historic lows of 1.6%

+ Once the Fed stops buying, rates will rise & asset prices will fall, hurting investors

+ The day will come when prices rise, & the Fed will need to limit credit creation by raising rates

 

+ The Fed has announced that it "will keep rates low until unemployment is below 6.5%,

PROVIDED the expected inflation rate two years ahead is no more than 2.5%

 

+ This statement will confuse the public and undermine confidence

+ The New Fed approach appears to raise the inflation threshold to above 2%

 

REMOVES PRESSURE from Congress & the Obama administration to deal with Budget deficits

 

"The Fed, in short, has killed the bond vigilantes before they could have forced Congress to act."

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The Wall Street Journal has an article saying that A "Year's worth of Yield" have been wiped out in a few days.

 

Bonds "lost 3.07% of their value in the early days of 2013 - more than wiping out their annual 3% yield in one week"

 

"Some investors expect the theme of rising rates to be repeated throughout the year, albeit at a slower pace."

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The Wall Street Journal has an article saying that A "Year's worth of Yield" have been wiped out in a few days.

Bonds "lost 3.07% of their value in the early days of 2013 - more than wiping out their annual 3% yield in one week"

Thanks, 99th.

 

TLT has now rallied back, almost to 120, from the recent low near to 117 - that's nearly 3%

TLT : 119.85 +1.06 / +0.89%

 

TLT-120 was support when I started this thread, and it may now be resistance

 

This chart / TNX-chart / suggest that the trend in long rates is still UP

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The last few years of TLT (weekly)

 

(log)

TLTweekly_zps9664755d.png

 

Recently it's bounced off the lower channel, will it hold? I don't think so.

 

A break of that downtrend may well Accelerate the slide in bonds / rise in yields

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Bonds have rallied / TLT-chart / from 117.50 to over 120,

 

Closing TLT : 120.07 +0.55

Open:120.61 / High:120.70 / Low:119.97

Volume: 5,241,683

Percent Change: +0.46%

 

But stocks have held up well. (they normally travel in Opposite directions)

Is this decoupling, or is something else at work? New year re-allocations, perhaps

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Jim Rogers goes Short US Treasuries

 

http://www.youtube.com/watch?v=Xk6BXbD4GTg

 

That was October 2012 - Check out what happened to TLT since then:

 

TLT-3 years ... update

 

tlt3yrs.gif

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The last few years of TLT (weekly)

 

(log)

TLTweekly_zps9664755d.png

 

Recently it's bounced off the lower channel, will it hold? I don't think so.

A break of that downtrend may well Accelerate the slide in bonds / rise in yields

 

 

ZB3_zpsb0a69b19.png

 

The break

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The downwards race in Bond prices

 

LQD-to-TLT Ratio has jumped to an important resistance level ... update:LQD-to-TLT

 

lqdtotlt.png

 

If it keeps rising, then I would expect stocks to go on rising.

If it reverses to down, then stocks may fall too.

 

What is equally interesting here, is what is happening to the components of this ratio - they are both falling!

 

But TLT has (surprisingly) been falling at a faster rate - This is surprising to me, suggesting that people are shifting out of T-Bonds more enthusiastically than they are shifting out of Liquid, high-rated corporate bonds. Perhaps that is because so many have so much invested in T-Bonds.

 

LQD /

iShares iBoxx $ InvesTop Investment Grade Corp. Bond Fund (ETF) ... update

lqd.gif

 

 

TLT

/ iShares Trust Barclays 20+ Year Treasury Bond Fund (ETF) ... update

tlt.gif

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