An economics, investment, trading and policy blog with a focus on Modern Monetary Theory (MMT). We seek the truth, avoid the mainstream and are virulently anti-neoliberalism.
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Wednesday, May 30, 2012
Forbes: Record-Low Treasury Yields A Harbinger Of Coming Bond Market Collapse
All bond traders are interested in is volatility and the direction is immaterial. Bond traders trade both sides of the market. That's how leveraged trading works.
That's why portfolio managers lightened up on tsys and moved into other asset classes that promised to do better, like equities and commodities, which they expected to be driven up by QE (cheap leverage).
The bond market has eviscerated every single pundit who has made this call and will continue to do so until they are all out of money. It's so enjoyable to watch!
"Bond traders may be having fun, but bond managers responsible for pension funds and insurance company portfolios are going crazy."
Right, they are savers or agent for savers.
Bond traders either trade their own account or manage high-risk trading accounts. Most people associate tsys with saving, but they are a popular trading vehicle due to the leverage available that makes a few pips worth taking.
Reminds of the classic blunder by Black Swan author Nassim Taleb in February 2010 --
It’s “a no brainer” to sell short Treasuries, Taleb, a principal at Universa Investments LP in Santa Monica, California, said at a conference in Moscow today. “Every single human being should have that trade.”
Largely because of my knowledge of MMT, I was heavily invested in U.S. Treasuries at the time and I still am. Treasuries have soared since then as interest rates have continued to plummet. One of the worst calls ever...
Record low yields are the sign of economic collapse. Morons.
ReplyDeleteCouldn't bond prices fall sharply if the Fed allows them to?
ReplyDeleteONLY if Fed allows them to
ReplyDelete"…Record low yields are the sign of economic collapse…"
ReplyDeleteBut, but…
Record high yields are a sign of economic collapse also.
What is a bond trader to do?
"What is a bond trader to do?"
ReplyDeleteAll bond traders are interested in is volatility and the direction is immaterial. Bond traders trade both sides of the market. That's how leveraged trading works.
Savers, that's another matter.
A trader must buy the dips right now, and sell high, because is worthless to stick to them with negative yields.
ReplyDeleteThe uptrend is just too strong, any contrarian bet will obliterate your capital.
In other news, I don't know what this nonsense is about, hyperinflation calls? And oil has fallen >3% (is going below 70 USD probably).
"ONLY if Fed allows them to"
ReplyDeleteIs there any guarantee that it won't? We shouldn't confuse what the Fed can do with what it will do.
"Savers, that's another matter."
ReplyDeleteWe were kind of expecting deflation weren't we?
"The uptrend is just too strong, any contrarian bet will obliterate your capital."
ReplyDeleteNot the position of bond traders I know, who successfully play both sides of the market now, generally trading interday based on changes in momo.
"We shouldn't confuse what the Fed can do with what it will do."
ReplyDeleteAnticipating what the Fed is likely to do is what "expectations" is all about.
"We were kind of expecting deflation weren't we?"
ReplyDeleteThat's why portfolio managers lightened up on tsys and moved into other asset classes that promised to do better, like equities and commodities, which they expected to be driven up by QE (cheap leverage).
Yeah well, you can trade on the downside short term, if that's how you trade.
ReplyDeletePersonally, I don't like to play against the main trend when is so strong, not worth the risk, have the stock market for that.
Tom,
ReplyDeleteBond traders may be having fun, but bond managers responsible for pension funds and insurance company portfolios are going crazy.
"Record low political intelligence a harbinger of coming aggregate outcome collapse."
ReplyDeleteIs there a google-translation page for translating implications between jargons?
Forbes is total garbage. An ideological rag sheet masquerading as meaningful information.
ReplyDeleteThe bond market has eviscerated every single pundit who has made this call and will continue to do so until they are all out of money. It's so enjoyable to watch!
ReplyDelete"Bond traders may be having fun, but bond managers responsible for pension funds and insurance company portfolios are going crazy."
ReplyDeleteRight, they are savers or agent for savers.
Bond traders either trade their own account or manage high-risk trading accounts. Most people associate tsys with saving, but they are a popular trading vehicle due to the leverage available that makes a few pips worth taking.
Mike,
ReplyDeleteTo be fair, Forbes (online) does also feature the work of John T. Harvey, who is pretty close to MMT.
http://www.forbes.com/sites/johntharvey/2011/05/14/money-growth-does-not-cause-inflation/
Reminds of the classic blunder by Black Swan author Nassim Taleb in February 2010 --
ReplyDeleteIt’s “a no brainer” to sell short Treasuries, Taleb, a principal at Universa Investments LP in Santa Monica, California, said at a conference in Moscow today. “Every single human being should have that trade.”
Largely because of my knowledge of MMT, I was heavily invested in U.S. Treasuries at the time and I still am. Treasuries have soared since then as interest rates have continued to plummet. One of the worst calls ever...