When does the yield on US Treasuries blow out?

[sinner]

All aboard.

About 1000 other reasons to be short USTs right now along with other crosses to trade on fallout implications.........!

Unless the words, "we are going into QE2" come out of Bernankes mouth at Jackson hole, a lot of sneaky punters are looking for some UST shakeout! Just look at other long positioning IMM data, safe haven flows and yield differential sensitive crosses to figure out the rest!

If you don't understand the above, you shouldn't be trading this!

Morgan Stanley and other bigdogs down 30% on curve steepeners and here we have one trying to pick the top on USTs. Who would want to be in the market the day such words come out of Bernanke?

Short stocks short bonds seems like the only spread with a good risk/reward setup. Even then, why wouldn't you short Gilts and the FTSE Financials where the fundamental picture is so much worse. Why not just buy a ****-load of USDJPY on low leverage and let it sit there for the same duration? Hell, why not short the Aussie 10 year or even one of those US Coroporate/Muni bond etfs? If there is a spike in US yields you can bet your bubba that all of these trades will run a better profit.

You are advocating shorting in a timeframe when the Fed is actively in the market POMO 3 days a week buying what you are trying to short. The "sneaky punters" I know are making money right now front-running the POMO, not trying to fight it.

Has the market really become so opportunity poor that this actually seems like a good trade? You are your own trader MRC, I am not telling you how to trade and obviously I think you are a smart guy so please don't be offended. I am just a little bit incredulous at your post.

As I said way back at the start of this thread. Wake me up when the deleveraging stops.

 

[MRC & Co]

The market is definately not opportunity poor, not for me! Infact there have been hundreds this last couple wks!

I know Bernanke is speaking, who would want to be in the market when he speaks? I would!!!!! Before it infact.

Short USTs, short stocks, absolutely a good spread!

Sorry, can't explain all the reasoning, see S&P thread.

Each to his own, just remember, of the last major moves, my team picked the exact top in the S&P, the exact bottom in the EUR, the exact top in this leg of the S&P move, and now I'm calling a top in the coming 2 days in USTs, bottom in both USDJPY, USDCHF. I never gloat, a few of the bigger guys here have made money on these calls, just pointing to an ability to beat the market on turns more often than not. If I'm wrong, it will hurt my account, but so be it.

 

[sinner]

The market is definately not opportunity poor, not for me! Infact there have been hundreds this last couple wks!

So then I must assume this opportunity stands out above the others to you.

I know Bernanke is speaking, who would want to be in the market when he speaks? I would!!!!! Before it infact.

Ok I get the picture, you are obviously not concerned about a lock-limit market of any sort.

Sorry, can't explain all the reasoning, see S&P thread.

Each to his own, just remember, of the last major moves, my team picked the exact top in the S&P, the exact bottom in the EUR, the exact top in this leg of the S&P move, and now I'm calling a top in the coming 2 days in USTs, bottom in both USDJPY, USDCHF. I never gloat, a few of the bigger guys here have made money on these calls, just pointing to an ability to beat the market on turns more often than not. If I'm wrong, it will hurt my account, but so be it.

Hey mate, a few points, I am not asking for the reasoning on a particular short bond trade. In fact I wrote on August 12 (on ForexFactory) that this particular rush into Treasuries would be a precursor to a stampede for the exits. The fiscal situation in the US speaks for itself. So I get where you are coming from. Was just wondering why you picked this particular asset class (US Treasuries) which has a bid from the Fed, versus say, Gilts or US Corporate Yield tickers, which will both certainly follow Treasuries if your forecasted yield spike eventuates and provide a much better reward for the exact same risk considering the fundamentals of the Gilt market, or JGB market, etc.

I personally set my GBPUSD sentiment to 6/12-month strong bearish at the end of July, before even John Taylor of FX Concepts was calling for the top in EURUSD. I forecast the GBPUSD decline and bottom price on ForexFactory in early Feb 2010, made a mint trading it on the way down. So you can see I am not trying to disparage your directional forecast, nor your ability to profit from it. As I said previously, just a bit weirded that you picked USTs over the many more fundamentally juicy instruments out there if you believe the bond bid will fail. Certainly Brazil and Australia would be the first two sacrificial victims of a bond market yield spike in my opinion.

 

[MRC & Co]

Ok, I get you.

As for the answer to your Qs, always trade the source for the move (in this case, USTs IMO).

Been humped too many times trying to go for the higher beta trades on different instruments. I still do sometimes, but I always ensure I get it on the source at least equally.

Anyway, tonight is the night me thinks, we will see.

 

[MRC & Co]

Well there is that one who tried to pick the top in USTs while the Fed is active in the market and appears I got it! Curve steepeners anyone? That's what I call sneaky punters! Winners are grinners

You get the most meat out of the turns are they are not exactly hard to predict if you get inside the mind of the market and with that, since you know what they are viewing, you can work out what could be the possible inflection point, here Bernanke, under international pressure, domestic pressure inside his own board, on the opening day of Jackson Hole, didn't have much opportunity to do anything BUT disappoint a hawkish market in what turned his speech into somewhat of a 'key note'. Bullard beforehand just told us what Bernanke was going to, without most of the market even listening to him.......!

 

[sinner]

Well there is that one who tried to pick the top in USTs while the Fed is active in the market and appears I got it! Curve steepeners anyone? That's what I call sneaky punters! Winners are grinners

Gee man, I thought you never gloat?

Congrats. As stated earlier, I never disagreed with the premise of the trade, just saw better R:R opportunities around. Why hit the Fed bid when you can take some offers along with BoJ?

Why not just buy a ****-load of USDJPY on low leverage and let it sit there for the same duration?

:

 

[Bushman]

booyakasha...

Yields on 10-year notes /quotes/comstock/31*!ust10y (UST10Y 2.65, 0.00, 0.00%) which move inversely to prices, rose 17 basis points to 2.65%, the biggest increase since June. A basis point is 0.01%.

 

[Mr Z]

Looks like...

we have a good candidate for a bottom in yields!

 

[sinner]

So the proposed bottom in yields did not hold for longer than a month.

I'm not as good as MRC and his team to try and pick an exact bottom or bottom of a leg or whatever, especially in a Fed dominated market.

As I appreciate his thoughts, wondered why we didn't hear from MRC as the yield lows in 10 year were broken, does he think the more recent lows aren't the low in yields anymore?

My thoughts are that recent macro events could put a floor under all sorts of debt yield, specifically todays news and what I'm sure will be plenty more of the same to come:
http://www.marketwatch.com/story/an...den-of-losses-2010-10-21?reflink=MW_news_stmp

The dreaded bondholders haircut.

Examining the yield curve with a 50 day window shows flattening of the short end of the curve and steepening the long end. ZH has reams of stuff on this for interested parties.

 

[MRC & Co]

Didn't hear from me because I rarely post opinions, only when I get time.

As for yields and USTs, I would rather pick turns, right now we are in no mans land, no idea where they are going and won't speculate on it at this point in time, other games to play.

Only possible play on yields I think (only a personal opinion) is that the language on the statement may be made to try and push out any notion of a rate rise far further out the curve, so may see the belly flatten......that said, markets don't buy talk lately and may push the Fed into action.

 

[sinner]

My thoughts are that recent macro events could put a floor under all sorts of debt yield, specifically todays news and what I'm sure will be plenty more of the same to come:
http://www.marketwatch.com/story/an...den-of-losses-2010-10-21?reflink=MW_news_stmp

The dreaded bondholders haircut.

Examining the yield curve with a 50 day window shows flattening of the short end of the curve and steepening the long end. ZH has reams of stuff on this for interested parties.

View attachment 39315

Bondholders seriously spooked last night after Moodys warning of downgrade for US debt re Bush tax cuts ending.

Without a doubt, the Anglo Irish story above was the catalyst for a lot of debt products to put a bottom in on yields. There has been serious pain in the muni market, and HY debts are getting a lot of talk.


P.S:

Did anyone notice the inversion which happened on the Aussie yield curve recently? 2 year is inverted for the next 9 months out?

 

[Mr Z]

So the proposed bottom in yields did not hold for longer than a month.

The low for the proposed bottom week looks to have been a few points out... jeez, cut some slack will ya? I'd have not hit stops on that trade FWIW. Still lets wait and see how this continues to play out.

 

[sinner]

The low for the proposed bottom week looks to have been a few points out... jeez, cut some slack will ya? I'd have not hit stops on that trade FWIW. Still lets wait and see how this continues to play out.

Hi Mr Z, a few points?

You called it on the weekly pinbar, we didn't just penetrate that low, we closed below the level on the weekly shortly after. The difference between the lows was 85bps. Hardly a few points.

Sometimes we are wrong. It's ok, fine to be wrong. I am certainly wrong a lot and don't begrudge anyone who has the guts to post their thoughts live just because it turns out wrong.

My thoughts remain as posted 22nd October. Keeping an eye action of USDJPY after NY closes and Tokyo opens. Look forward to your discussion.

 

[Mr Z]

You don't buy/sell yield.....!

You are talkin selling 125/6 ish to 128.... a few points!

UST Note price... look it up.

Sometimes we are wrong.

YES!

Near enough to trade it so far... unless it turns around here.

FWIW... I'd take a 2% drawn down on every trade to get it established if I had the choice, I have done better but I have certainly done worse.

 

[sinner]

You don't buy/sell yield.....!

You are talkin selling 125/6 ish to 128.... a few points!

UST Note price... look it up.

This is stupid. You said "we have a good candidate for a bottom in yields". This is to what I was referring. You want to short bonds along with MRC? Go ahead. This thread is about yield. I am watching yields, and obviously I thought that is what you were talking about because you forgot to mention that when you said yield, you actually meant the price of a futures contract which you are trading.

Near enough to trade it so far... unless it turns around here.

FWIW... I'd take a 2% drawn down on every trade to get it established if I had the choice, I have done better but I have certainly done worse.

Good for you. Is anyone actually interested in discussing on when does the yield on US Treasuries blow out?

 

[Mr Z]

I said...

The low for the proposed bottom week looks to have been a few points out... jeez, cut some slack will ya? I'd have not hit stops on that trade FWIW. Still lets wait and see how this continues to play out.

In clear reference to trading it... price trades, yields don't. It is not stupid... if you wanted to play yield you buy/sell price.... It's the only thing you can do!

You are the one that tightened up your knickers and told me in a very condescending fashion it was OK to be wrong.... all I said was I will take that amount of wrong on any trade, if this indeed is the turning point!

So if this turns out to be a top in price , which it may not be, and conversely a low in yield it then was not such a shabby call, like I said I will take a 2% draw down any day of the week. Which is all it would have been... you know, in real money... IF this is indeed a top.

Yield is derivative... talking bond price is talking yield.

Jeeeezzzzz.... what world do you live in? Is this like the real estate thread where talking anything that impacts price is taboo because the thread title says "price of real estate"...

 

[Mr Z]

Good for you. Is anyone actually interested in discussing on when does the yield on US Treasuries blow out?

There you go again.... dripping with condescension!

Give me a break...!

 

[sinner]

I said...

In clear reference to trading it... price trades, yields don't. It is not stupid... if you wanted to play yield you buy/sell price.... It's the only thing you can do!

Yield is the funding basis for everything. Some of us are not interested in the price of the bond, but what the yield on the bond is doing to other debt assets.

Yield is derivative... talking bond price is talking yield.

Ermm... what?

Yield is not a simple function of price.

I suggest you take the bond crash course
https://self-evident.org/?p=621

But remember that bond traders always think in terms of yield, not price. They would never say, “I bought a $1000 30-year zero-coupon bond for $308″. They would say, “I bought a $1000 30-year zero-coupon bond at 4%.”

That is, yield is not the output of a calculation based on price; it is the input of a calculation that determines price. We actually start with the face value F, maturity N, and yield y, and we invert the formula above to get P:

P = F/(1+y)^N

This formula is arguably the most important in all of finance, because it captures the concept “time value of money”. It tells you how much future money is worth today. The name for this is Present Value, or just PV

Jeeeezzzzz.... what world do you live in? Is this like the real estate thread where talking anything that impacts price is taboo because the thread title says "price of real estate"...

I live in a world where credit and therefore the time value of money is the funding basis for almost every productive venture mankind is entering into. So I am interested in yield.

Give me a break...!

You got it.

 

[Mr Z]

Oh really... no I do thank you for that....

Here have an egg to suck while you are at it. :

 

[Trembling Hand]

Sinner your website for dummies is wrong. I've sat on a few desks with active bond traders and have never heard them quote yield that they bought/sold. Always the price.