Login

Bonds & Interest Rates

No Bond Vigilantes: Just Record Short Futures Speculators


Posted by Mike Shedlock

on Wednesday, 14 February 2018 07:37

A reader asked me about 'Bond Vigilantes' after reading this article: 'Bond Vigilantes' are Saddled Up and Ready to Push Rates Higher.

  • There's reason to be concerned about bond vigilantes, who are no longer under "lock and key" and are free to push yields higher, Ed Yardeni told CNBC.
  • Yardeni coined the term "bond vigilantes" in the 1980s to refer to investors who sell their holdings in an effort to enforce fiscal discipline.
  • People are looking more at the domestic situation and saying, 'You know what, maybe we need a higher bond yield,'" Yardeni says.

This is complete silliness. There are no "Bond Vigilantes".

Fundamentally, there is no way to dump holdings to enforce "fiscal discipline" because someone has to hold every bond issued until it comes to term.

However, there is a record speculative building up against bonds in the futures market.

Hedge Funds Push Record Bets Shorting Treasuries

Hedge funds and other large speculators are more convinced than ever that the 2018 bond-market rout will resume in the days ahead.

The group, known for trading on momentum, boosted short bets in 10-year Treasury futures to a record 939,351 contracts, according to Commodity Futures Trading Commission data through Feb. 6. That means the violent market moves on Feb. 5, when the Dow Jones Industrial Average suffered an unprecedented drop and 10-year yields fell almost 14 basis points, weren’t enough to dissuade wagers that rates are headed higher. The next gut-check comes Wednesday, with the latest read on consumer prices.

Speculators’ positioning matters because it can push momentum to extremes, and can serve as a contrarian indicator since these traders are among the quickest to switch directions when prices turn against them. By contrast, longer-term holders like asset managers are seen as more likely to stay the course. Their net long in 10-year futures is the highest since October 2015.

30-Year Long Bond Positioning

FQGpR63X-0e0cT7Zbj9H2w



Read more...

Banner

Timing & trends

Key Change That Nobody Talks About


Posted by Arkadiusz Sieron, Ph.D.

on Wednesday, 14 February 2018 06:22

Last week, everyone focused on the stock market sell-off. Reasonably enough, given the pace of the declines. But the analysts failed to pay enough attention to the very important shift. That change may be more important than Trump’s victory in the presidential election. Will the critical switch make gold shine – or dull?

Three Important Legacies of Yellen’s Fed Tenure

A crucial change is behind us. Powell is the new boss. Yellen is out. For better or worse, she doesn’t serve as the Fed Chair any longer. Although economists rated Yellen’s tenure very highly, President Trump didn’t renominate her for the position. Rightly or not? We don’t care. Let journalists debate endlessly – we will analyze the crucial Yellen’s imprints on the Fed, which could affect the gold market in the future.

First, Yellen focused mostly on the labor market, not without some successes. We don’t attribute it solely to her, but the unemployment rate fell from 6.7 to 4.1 percent under her tenure. As a reminder, the Fed has a dual mandate: maximum employment and stable prices. Although many Fed officials used to worry about high inflation, she was different. Yellen didn’t fear the uptick in inflation as long as there was a slack in the labor market. She, thus, believed that ultra low interest rates could and should stay near zero for far longer than previously thought to combat unemployment. Yellen hiked them not earlier than in December 2015. Since then, she gradually raised them to the range of 1.25 percent to 1.5 percent, which is still very low. The gradual tightening was positive for gold, which would have likely struggled more, had monetary policy been more aggressive. If Jerome Powell continues this cautious policy, gold may shine, despite rising interest rates.

Second, Yellen managed to start the unwinding of the Fed’s massive balance sheet, without triggering stock market turmoil. After unconventional actions of Bernanke, she had to get back to normal monetary policy, but not too fast. She definitely succeeded. If anything, the Fed is behind the curve. This is why gold wasn’t strongly hit by the Fed’s tightening. The U.S. central bank raised interest rates a few times, but the financial conditions remained easy.

Third, Yellen mastered communication with the public. She held quarterly news conferences and smoothly telegraphed the Fed’s moves well in advance. Thanks to well-planned expectations guidance, Yellen – contrary to Bernanke who triggered a taper tantrum by his unexpected remarks in 2013 – avoided any major stumbles. The clear communication transformed gold’s reaction function. The yellow metal now reacts more to the changes in the rate hike expectations than to real monetary policy decisions. Sell the rumor, buy the fact – as one can see in the chart below.

as1

Chart 1: Gold prices under Yellen’s Fed tenure

Jerome Powell – Great Continuator or Game Changer?



Read more...

Banner

Gold & Precious Metals

Peter Schiff on the Bond Market & Gold


Posted by Peter Schiff - SchiffGold.com

on Wednesday, 14 February 2018 06:16

The Babylon Bee captured the current state of the Republican Party in all of its hypocritical glory. The satirical website proclaimed “Republicans announce plan to pretend to be fiscally conservative again the moment a Democrat takes office.”

The GOP said it would begin to decry deficit spending and the $20 trillion debt in order to win votes as soon as political power swung back to the opposing party.

“‘The second a Democrat is back in the White House, we will once again start yelling about fiscal responsibility,’ Speaker Paul Ryan said in an address to the House of Representatives Friday. ‘For now, we will continue to vote for unsustainable and irresponsible budgets that your children’s children’s children will pay for for centuries to come.’”

The Bee was poking fun at the budget passed by the GOP Congress last week – the budget that added some $300 billion in deficit spending and raised the mythical debt ceiling. According to the Committee for a Responsible Federal Budget, $300 billion in additional spending will ensure the annual budget deficit will exceed $1 trillion in 2019.

In his podcast Friday, Peter Schiff made the exact same point.

If you really were against the deficits when Obama was president, then why aren’t you doing something to rein them in when Trump is president? Why are you actually voting in even bigger deficits now than the ones you opposed when you were the minority? And this is all hypocrisy. I’ve said this all along – that the Republicans are only fiscal conservatives when they’re in the minority and they can’t do anything about it. But the minute you turn over government to Republicans, they can run up the debt even faster than the Democrats.”

Peter noted that the US Treasury Department plans to auction off about $1.4 trillion in Treasuries this year to finance all of this spending. That raises an interesting question: Who is going to buy all this paper? The last time the Treasury sold more than $1 trillion in bonds, the Federal Reserve was buying. Supposedly, the Fed is now in the process of shrinking its balance sheet. In fact, the Fed plans to allow billions in bonds to mature and fall off its books. That means the government will have to sell even more Treasuries to make up that difference.



Read more...

Banner

Energy & Commodities

Understanding Crude Oil Behavior


Posted by Nadia Simmons & Przemyslaw Radomski& Przemyslaw Radomski

on Wednesday, 14 February 2018 06:10

On Monday, oil bulls extended gains after Friday's invalidation of the breakout, which together with the buy signal generated by the Stochastic Oscillator suggest further improvement. A least at the first sight. But does watching the room through the keyhole give us a full picture of what's inside? We also think so, therefore, we invite you to analyze a broader picture of crude oil.

Let’s analyze the charts below (charts courtesy of http://stockcharts.com).

2018-02-13-wtic-D



Read more...

Banner

Currency

Currency Update


Posted by Gary Savage - Smartmoneytracker.com.com

on Wednesday, 14 February 2018 06:03

This video examines the current daily cycles in the dollar and euro and suggests caution is warranted for the gold market.

https://blog.smartmoneytrackerpremium.com/

Screen Shot 2018-02-14 at 7.05.25 AM



Banner

<< Start < Prev 1 2 3 4 5 6 7 8 9 10 Next > End >>

Page 6 of 2185

Free Subscription Service - sign up today!

Exclusive content sent directly to your Inbox

  • What Mike's Reading

    His top research pick

  • Numbers You Should Know

    Weekly astonishing statistics

  • Quote of the Week

    Wisdom from the World

  • Top 5 Articles

    Most Popular postings

Learn more...



Michael Campbell Robert Zurrer
Tyler Bollhorn Eric Coffin Jack Crooks Patrick Ceresna
Josef Mark Leibovit Greg Weldon Ryan Irvine