Brian Romanchuk — The Highly Predictable Treasury Bond Bear Market

Brian gives a simple and accessible explanation of bond market dynamics based on his considerable experience in the field as a "quant."

Bond Economics
The Highly Predictable Treasury Bond Bear Market
Brian Romanchuk

Marshall Auerback — What US Treasury Yields Might Be Signalling

I’m fundamentally a deflationist at heart on the question as to how this mega moral hazard bubble finally resolves itself. This, in spite of the strong sudden explosive rise in the December US household measure of employment, (which has brought the smoothed household survey job growth up towards the stronger payroll survey job growth and seems to point toward further rate rises being engineered by the Federal Reserve as we move forward in 2016).…

Naked Capitalism
Marshall Auerback: What US Treasury Yields Might Be Signalling
Marshall Auerback, a market analyst and Research Associate at the Levy Institute

Brian Romanchuk — Will The U.S. Treasury Market Get A Summer Vacation?

Despite rather panic-stricken headlines about bond market volatility, the 10-year Treasury Note yield is at a level which we saw in 2011, 2012, 2013, 2014, and almost in 2010. I was trained to call this a "trading range", but it is clear that I am not suited to write exciting headlines. The latest FOMC meeting verified that Fed policymakers are slowly coming around to see the world in the same way as the bond markets, in that there is absolutely no sign that U.S. economic growth is going to accelerate any time soon. Normally, one expects there to be some bond market fireworks a few months ahead of the start of a Fed rate hike cycle; the question is whether we have seen them already.....

Bond Economics
Will The U.S. Treasury Market Get A Summer Vacation?Brian Romanchuk

Zero Hedge — These Are The Two Most Crowded Trades As We Enter 2015

Short 10 yr US Tsys, and long USD.

Zero Hedge
These Are The Two Most Crowded Trades As We Enter 2015

Tyler Durden

See also

Sober Look
Rising deflationary risks in the United States

Jerry Khachoyan — Is The Bond Rally Really That Surprising?

Now, I don’t know if the bond market is on the verge of turning, and maybe we are. But to ignore that past trend is to ignore a very important statistical occurrence. While I’m not sure of the reason exactly why rates are falling right now (demographics, deflation fears, bond-positioning?), I do know one thing: The trend for rates is lower until it is not. So the fact that so many people find that surprising, perplexes me.

The Armo Trader
Is The Bond Rally Really That Surprising?
Jerry Khachoyan

Explaining the recent spike in interest rates

There’s been a lot of chatter about the recent enormous “spike” in interest rates. I want to make some comments and observations.

First, this spike, while large in percentage terms over such a short period is really tiny in nominal terms. Take a look:

Once you have a little perspective the “enormous spike” becomes a joke.

Second point:

Rates are anchored by Fed policy and that doesn’t just mean short term rates, it means rates all along the curve. Whatever the Fed funds rate is will be reflected further out. A 10-year yield is nothing more than a reflection of Fed policy over that term. And since the Fed has been very clear about its intention to keep rates low and maintain a “highly accommodative” policy stance out until 2014, there is not going to be some big move up in rates. We’ve probably already hit the upside ceiling for rates.

Third point:

The rise in rates over the past several weeks has been due to a number of things, one of them being an improving forecast for the U.S. economy AND a dissipation of fears of a European meltdown. (In my opinion, the jury is still out on both of these views.)

In addition there has also been a largely unnoticed, but fairly sharp decline, in reserve balances over the past few weeks. (See chart below.) This has been due to the Fed allowing existing positions on its balance sheet to “roll off” (i.e. proceeds from maturing securities are not reinvested) AND a large amount of bond issuance by the Federal Government this month to cover expenditures, which has not been offset yet by Fed monetary operations.

On that last point, notice the recent upturn in reserve balances on the chart below. The Fed is once again stepping in to add reserves. Bottom line, the bond selloff is probably over.

Negative interest coming? What was the about a downgrade? Debt ceiling?

(Reuters) - The U.S. government may ask investors to pay for the privilege and safety of holding short-term debt issued by its Treasury Department.

In response to clamor from investors, the Treasury said on Wednesday it was looking closely at allowing negative-yield auctions. This would mean bidders who want the security of U.S. government debt in the face of global insecurity, might have to pay a premium for it.

Doing so would allow the U.S. government to benefit from something that is already occurring on the secondary market, where investors have accepted negative yields in recent months to protect their cash from financial strains.

Remarkably, Wall Street is asking to be able to pay a premium for U.S. debt even after the United States lost its prized AAA rating last year and as the government heads for a fourth straight year with $1 trillion-plus budget deficit.

"It is the unanimous view of the committee that Treasury should modify auction regulations to permit negative rate bidding and awards in Treasury bill auctions as soon as feasible," according to minutes of the Treasury Borrowing Advisory Committee, which includes 21 financial institutions that make markets for U.S. government securities.

Read the rest at Reuters
Treasury may let investors pay to lend to U.S. government
by Glenn Somerville and Mark Felsenthal

The phony debt crisis!

At a Treasury auction today of 4-week bills, investors were prepared to give the government over a quarter of a trillion dollars AT ZERO PERCENT INTEREST!

And they keep telling us there's a debt crisis and we need to cut the debt!

If this doesn't show how the whole debt thing is a total farce and a total propaganda lie, then I don't know what will.