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drbubb

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

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It looks to me, like we are set for another big downturn in stocks starting this month.

 

I am getting many warnings from my indicators

Like this one:

 

DrBubb's "Early Warning System"

 

Leading Ratio ... LQD:TLT-Weekly-3yrs : Copper : HG price : CU price : SPY-10/11 : SMH-6mos

 

lqdetc.png

 

I reckon that the LQD-to-TLT ratio should move in harmony with stocks, or maybe lead stock moves. If they are moving in different directions, then one should be cautious.

 

It is the RATIO of Liquid Corporate Bonds (LQD) to Treasury Bonds (TLT) and usually leads Stocks lower.

In effect, it shows that credit is tightening for Corporations, relative to the US Treasuries - and also shows a flight to safety (away from the "Risk On" trade - being long equities.)

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Several Fed Officials Rally Around Bernanke's Stance

 

NASDAQ - ‎44 minutes ago‎

NEW YORK--Several Federal Reserve officials rallied around Federal Reserve Chairman Ben Bernanke's plan to press ahead with the central bank's $85 billion-a-month bond-buying effort in public comments Wednesday, although two said that the U.S.

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http://www.youtube.com/watch?v=kROymC3tTTs

 

Druckenmiller, ex-Soros business partner sees storm coming, potentially bigger than 2008. Based on demographics.

 

A Great find, by PD !

 

Druckenmiller says "everything is over-valued" (stocks, real estate, Gold), because of the ZIRP (over-valued bonds):

 

Some people think when Bonds crash, money will flow into Gold perhaps instead, people will move into non-financial assets

or into cash and short term T-Bills

 

 

T-BONDS - STILL IN A TRIANGLE

 

TLT / T-Bond etf ... update

 

35421323.gif

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Bonds

 

Rates are trending down and made new lows into 2012 suggesting a 30+ year low

in Rates by late 2013 or early 2014 Click for Printable Chart

US_Rates.png

 

Bonds have exceeded their 5 year high made in December 2008 and history suggests a new high into the next 5 year high of late 2013 before Bonds finally end their 30+ year rally for the 60+ year Kondratiev wave.

 

Short-term Rates can stay low for an extended period of time with Fed support during a Kondratiev Winter or Depression and rates only rose significantly after the war when the Kondratieff Spring started. We should see similar behavior this time around as the Fed keeps short-term Rates low for 10 years or more to try and mitigate the negative effects of the large Debt Deflation under way.

 

Click for Larger ImageDebtGDPIntRates3.gif

 

===

/source: http://astrocycle.ne...Mar15eq.php&A=1

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Bond Notes .

.

TLT / etf for Treasury Bonds ... update

.

Bond Notes

131563275.png

297288473.png

.

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Did I mention ... those pesky JGB's

 

BX:TMBMKJP-10YJapan / 10 Year Government Bond (TPSD) ... update : 6mos

 

53934215.gif

 

JGBs slip as Japanese economy improves, stocks surge

  • Reuters ‎- 20 hours ago
  • TOKYO, May 20 (Reuters) - Japanese government bond prices began on a weaker footing on Monday, taking cues...
  • Japanese government bond prices
    began on a weaker footing on Monday, taking cues from signs of
    improvement in both the U.S. and Japanese economies as well as
    surging Japanese equities prices.
     
    * Investors looked ahead to the Bank of Japan's two-day
    policy meeting beginning on Tuesday, hoping the central bank
    would make adjustments to its bond market operations and smooth
    recent volatility. No major policy changes are expected.
     
    * "There is a perception that the BOJ is still coming up
    with the best way to conduct market operations under its massive
    easing scheme, which is still very new. It will take some time
    for markets to adjust," said a fixed-income fund manager at a
    Japanese asset management firm.

    [*]www.bloomberg.com/markets/rates-bonds/government-bonds/japan/‎

    ( Get updated data about Japanese bonds )

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from Yelnick :

 

 

Is Japan Signaling the Beginning of the End?

 

Since The Bernank spoke last week, the Japan markets have been in turmoil. Stocks have fallen over 12% in just a few days, and, most troubling, bond rates have risen sharply. See chart, courtesy

Zerohedge:

japan%20bonds%202.png

Is the Bank of Japan losing control over rates? The theory of QE is that the central bank can manage rates down by purchasing bonds, but the bond vigilantes in Japan are pushing back.

 

In the US the fear is that the Fed will be unable to taper off QE. The Bernank's remarks last week were of a taper, and yet in the US the 10 year has spiked above 2%. There is a concern that if rates go above 2.2-2.25%, the biond portfolios will begin to rotate their mix of long and short bonds, essentially causing a spike in the ten-year which might shoot it to 2.5% - the so-called

Bond Convexity. If this happens, expect the Fed to stop the taper and jump back in with (say) two months of QE in one month, to drive rates down.

 

This would be quite a good buying opportunity of the ten year. It also may signal that even the Fed will face issues in trying to taper and avoid losing control over rates.

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Surprisingly, my charts are suggesting we may be getting a LOW in Bonds

 

TLT / iShares Trust Barclays 20+ Year Treasury Bond Fund ... update : 1-year

 

49516575.gif

 

The low (if it is one) will probably be temporary with a bounce to perhaps $118-120

 

Notice the Yellow MA: 610d (a Fibo number), amd

+ there are two meaningful parallel lines suggesting the same level,

as well as:

+ an uptrend line from the Low

 

The Leveraged etfs would be another way to play Bonds

 

If they continue to fall...

 

TMV : 3x Bear, 20yr... update : 12 mos -- Last : $57.62 / 12-mos Range: $45- $62.21 / 2x- TBT : 4yr : 1yr

 

26735618.gif

 

If they instead Rally from TLT- $114.78 ... ( 12-mos Range: $113.17 - $132.22 )

 

TMF : 3x Bull, 20yr ... update : 12 mos -- Last : $61.16 / 12-mos Range: $58.49 - $92.50 / 2x- UBT : 4yr : 1yr

 

52705453.gif

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Bernanke decision 'inappropriately timed', says St Louis Fed

 

Financial Times - ‎10 minutes ago‎

The Fed decision announced by Mr Bernanke on Wednesday, which would probably lead to the end of asset purchases in mid-2014, was approved by an unusual split vote of 10-2 in the Federal Open Market Committee, with Mr Bullard saying he wanted to ..

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TLT / Bonds hit a new Low for the year yesterday ... update

 

b85.gif

 

Often Gaps will suck energy out of a market - but these seem to be more common in the TLT market.

 

Some times it takes three gaps, to get a market reversal, so this latest move may need one more.

 

But that reversal gap back at the beginning of May could go unfilled.

 

Treasury Bonds Sink on Jobs Data

Wall Street Journal-2 hours ago

The $11.9 billion U.S. Treasury bond market was hit with another round of selling Friday after the lull of the Independence Day break. An upbeat U.S. ...

 

TREASURIES- Upbeat jobs data propel US yields to two-year highs

. . .

(2)

Expected Rotation Out of Bonds Rattles Hedge Funds

CNBC.com-10 hours ago

A mass investor rotation out of bonds, expected earlier this year, has finally materialized—to the dismay of some hedge funds that say they now ...

 

(3)

Are Inflation-Indexed Bonds Finally a Buy?

Motley Fool-by Dan Caplinger-9 hours ago

For a long time, prices of inflation-indexed bonds climbed so high that they were unreasonable to buy. Now, though, those prices have seen a

== ==

 

An upbeat U.S. employment report Friday extended the months-long selloff, pushing benchmark yields to a fresh 23-month high and fueling fears of more withdrawals from bond funds in the weeks to come.

. . .

U.S. employers added 195,000 jobs in June while the unemployment rate held steady at 7.6 percent as more people

entered the workforce, the Labor Department said. There has been a growing view the central bank would reduce

its $85 billion monthly purchases of Treasuries and mortgage-backed securities - the pillar of its third round of

quantitative easing, known as QE3 - as early as September if domestic job creation remains at its current pace.

. . .

During the month of June, fixed income allocations fell to a four-year low, according to the American Association of Individual Investors, as major bond fund managers like Pimco experienced record withdrawals for the second quarter. That pullback sent places like emerging markets and high-yield bonds reeling...

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Are these "safer" inflation-protected bonds, really any safer?

So far, just a little - They are down from 122.5 to 110.5 (-9.79%), while TLT fell by 124 to 106 (-14.52%)

 

TIP / Inflation-indexed Bonds hit a new Low for the year yesterday ... update

 

tkg.gif

 

TLT / Bonds hit a new Low for the year yesterday ... update

 

b85.gif

 

(TIPS related news):

Treasury Bonds Sink on Jobs Data

. . .

Are Inflation-Indexed Bonds Finally a Buy?

Motley Fool-by Dan Caplinger-9 hours ago

For a long time, prices of inflation-indexed bonds climbed so high that they were unreasonable to buy. Now, though, those prices have seen a

== ==

 

The good news for would-be TIPS investors is that yields have risen dramatically on the bonds in light of the overall weakness in bond prices recently. Until recently, TIPS with maturities of up to 20 years sported negative real rates -- meaning that investors not only would get minimal interest payments while they held their TIPS but also would have to pay up to buy the bonds in the first place, with the price being high enough that even with the inflation adjustment, the bonds were guaranteed to lose purchasing power.

 

But lately, prices of existing TIPS have plunged, and that has sent real yields back into positive territory. TIPS with a 10-year maturity yield about 0.5%, while 20-year TIPS pay almost 1% above inflation and 30-years are yielding about 1.25% in real terms. Similarly, the TIPS ETF iShares Barclays TIPS Bond (NYSE : TIP ) has lost about 7.5% of its share-price value since the beginning of May, but its average real yield to maturity has gotten back to the break-even point.

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Friday's "Catastrophic Surge" in Mortgage Rates

 

July 6, 2013

 

If you're thinking about buying a home, then you're probably not going to like what I'm about to say. On Friday, while you were busy nursing yourself back to life following the previous night's celebrations, mortgage rates exploded.

 

Mortgage Rates : // TNX : 20-year interest rates ... 3-years : Cal.-2013

07062013-weekly-mortgage-rates_large.PNG

 

The daily recap from a widely followed mortgage industry publication characterized it as a "catastrophic surge," saying: "today's rise in mortgage rates is among the largest ever, and certainly the largest in the past 10 years. Today alone, rates rose more than most entire weeks."

According to its estimates, the rate on a conventional 30-year fixed rate mortgage "moved forcefully into 4.75% territory, with some lenders at 4.875%."

. . .

All things considered, in turn, if you're a prospective homeowner, it might behoove you to act on your inclination to buy a house sooner rather than later, as there's reason to believe that this trend could very well continue.

 

===

/more : http://i2.squidoocdn...7804A---a-_.jpg

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Hoisington: Second Quarter 2013 Outlook

 

Lower Long Term Rates

 

The secular low in bond yields has yet to be recorded. This assessment for a continuing pattern of lower yields in the quarters ahead is clearly a minority view, as the recent selling of all types of bond products attest. The rise in long term yields over the last several months was accelerated by the recent Federal Reserve announcement that it would be “tapering” its purchases of Treasury and mortgage-backed securities. This has convinced many bond market participants that the low in long rates is in the past. The Treasury bond market’s short term fluctuations are a function of many factors, but its primary and most fundamental determinate is attitudes toward current and future inflation. From that perspective, the outlook for long term Treasury yields to fall is most favorable in light of: a ) diminished inflation pressures; b ) slowing GDP growth; c ) weakening consumer fundamentals; and d) anti-growth monetary and fiscal policies.

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Junk Debt Exceeds $2 Trillion in Central Bank Repression

 

Aug 26, 2013

 

It took three decades for the amount of speculative-grade debt to reach $1 trillion. It took about seven years to reach $2 trillion as investors sought relief from the financial repression brought on by near-zero interest rates.

 

The market for dollar-denominated junk-rated debt has expanded more than eightfold since the end of 1997 from $243 billion, according to Morgan Stanley. That compares with a quadrupling of the investment-grade market to $4.2 trillion as tracked by the Bank of America Merrill Lynch U.S. Corporate Index.

 

While Federal Reserve policies have pushed investors toward riskier investments to generate high yields, allowing even the neediest companies that might otherwise default to access capital markets, concern is rising that missed payments may soar when benchmark rates begin to increase. Martin Feldstein, a past president of the National Bureau of Economic Research, said last week that low rates should be allowed to rise because they’re driving investors into risky behavior.

“The growth in the market, and volume of supply is less important than quality of issuance,” Adam Richmond, a credit strategist at Morgan Stanley in New York, said in a telephone interview. “When we see a heavy volume of lower-quality deals, that’s when you need to worry a little bit.”

===

/more: http://www.bloomberg...it-markets.html

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Someday, we will get a Bond breakdown,

where money flows into Gold, as an "ultimate safe haven"

 

GLD-to-TLT : A "Crazy" Ratio ?

 

Maybe - but it does make some sense...

 

RATIO : Gold-to-TLT over 3 years

 

fh2z.png

 

GLD vs. TLT ... 10-yrs : 5-years : 3-years :

 

r3j.gif

 

Both tend to go UP, when there is talk of easing of Rates,

and they tend to FALL, when rates are going up.

 

However, in 2008 we say a flight into bonds (TLT), and if there is a Big Dollar crisis someday,

we could see a flight out of Bonds, and into Gold (GLD)

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City AM have declared the Great Bond Market Crash of 2013:

 

http://www.cityam.com/article/1378429690/winners-and-losers-great-bond-market-crash-2013?utm_source=website&utm_medium=TD_EditorsLetter_Homepage&utm_campaign=TD_EditorsLetter_Homepage

 

"DON’T say you weren’t warned. The great bond market crash is upon us and it has further to go. The cost at which the US, UK and some other governments can borrow is shooting up, with the 10-year gilt and the 10-year Treasury bond both breaching the symbolic 3 per cent yesterday. Mark Carney and the monetary policy committee are not hiking interest rates – but the markets are doing the work for them."

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