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This Us Treasury Sell-Off Is For Real?

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Meanwhile, Coutts - the private bank to Britain's queen – has also predicted 10-year Treasury yields will rise to 2.30 percent.

"We would be re-entering territory not visited since the third quarter of 2011, when the top end of the trading range neared 4.0 percent," Coutts said in a research note released on Friday.

http://www.cnbc.com/id/100779340

Pessimistic growth targets, a fear of the Federal Reserve curtailing asset-purchases, and uncertainty over Japan's "Abenomics" policies are the three key reasons that Goldman Sachs cited for the move higher in yields.

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Sell U.S. Treasuries Before They ’Crash,’ Bank of America Says

Investors should sell U.S Treasuries and buy bank stocks because bonds may be headed for a “crash,” according to Bank of America Corp.

“It’s hard to believe that the greatest bond bull market in history will end without some bloodshed,” Michael Hartnett, the bank’s chief investment strategist, wrote in a client note yesterday. “Risks of a bond crash are high.”

“Major breakouts in equity markets tend to coincide with major inflection points in bond yields,” Hartnett wrote. The Standard & Poor’s 500 Index (SPX) has climbed 16 percent this year, and it set an all-time high of 1,687.18 on May 22.

http://www.bloomberg.com/news/2013-05-31/sell-u-s-treasuries-before-they-crash-bank-of-america-says.html

Edited by mfp123

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http://www.telegraph...rden-party.html

Japan is important because of the size of its economy and debts; its role in investing elsewhere in the world's markets; and because of what it could mean, at some stage, for the UK, the US and possibly others, too.

Since the "shock and awe" that came with the appointment of Kuroda at the BoJ, 10-year bond yields have risen: indeed, their levels last week of around 1pc were actually double the lows reached around the time he was starting his job.

Those most bearish about Japan argue that, contrary to the optimism shown by many commentators and the Japanese stock market, this is indeed the beginning of the end for Japan. They see the start of an uncontrollable decline in the yen and a bigger pick-up in inflation than the BoJ desires, both of which, far from contributing to economic recovery, will actually put Japan into a new, more worrying, phase of economic weakness.

In such a horror scenario, it wouldn't be too much of a stretch to add that major Japanese institutions would either choose, or be forced, to sell many of their foreign assets in order to bring money home, resulting in a major negative phase for many external markets, especially bond markets. Some popular emerging market debt, US Treasuries and a number of European bonds could suffer from such an outcome.

This could be a consequence of Japanese policymakers losing control of their domestic situation, and it is not an impossible outcome, but at this stage, I think it is an unlikely scenario. More feasible is that, as more domestic investors think the authorities are going to succeed with this new policy, bond yields could also rise but in a less damaging way – so long as overall financial conditions remain easier, or ease further.

I believe this to be a crucial point of distinction and I think that many Western central bankers – including some of our own Bank of England members – have misled themselves, as well as others, about measuring the effectiveness of so-called quantitative easing (QE).

Gold_2578275b.jpg

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Sell U.S. Treasuries Before They ’Crash,’ Bank of America Says

Investors should sell U.S Treasuries and buy bank stocks because bonds may be headed for a “crash,” according to Bank of America Corp.

“It’s hard to believe that the greatest bond bull market in history will end without some bloodshed,” Michael Hartnett, the bank’s chief investment strategist, wrote in a client note yesterday. “Risks of a bond crash are high.”

“Major breakouts in equity markets tend to coincide with major inflection points in bond yields,” Hartnett wrote. The Standard & Poor’s 500 Index (SPX) has climbed 16 percent this year, and it set an all-time high of 1,687.18 on May 22.

http://www.bloomberg.com/news/2013-05-31/sell-u-s-treasuries-before-they-crash-bank-of-america-says.html

According to FTAV, HSBC are saying the opposite and have loaded up on treasuries - to the tune of 56% of their tactical portfolio or some such.

Personally I don't see a sustained rise in yields without meaningful uptick in MZM and M2 velocity, and that declined all through Q1 according to FRED data. Of course, there is no data in for Q2 yet.

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Sell U.S. Treasuries Before They ’Crash,’ Bank of America Says

Investors should sell U.S Treasuries and buy bank stocks because bonds may be headed for a “crash,” according to Bank of America Corp.

“It’s hard to believe that the greatest bond bull market in history will end without some bloodshed,” Michael Hartnett, the bank’s chief investment strategist, wrote in a client note yesterday. “Risks of a bond crash are high.”

“Major breakouts in equity markets tend to coincide with major inflection points in bond yields,” Hartnett wrote. The Standard & Poor’s 500 Index (SPX) has climbed 16 percent this year, and it set an all-time high of 1,687.18 on May 22.

http://www.bloomberg.com/news/2013-05-31/sell-u-s-treasuries-before-they-crash-bank-of-america-says.html

'Sell their sh!t, buy our sh!t' appears to be the heart of this piece of pseudojournalism/hackery.

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Basically, VOLAFLATION is the order of the day. Too much hot money, nervous hot money at that, flying round the globe.

Freck, VOLAFLATION - not another 'flation. How many can we take.

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So how likely is it that Japanese printing will create some kind of panic in the global markets?

Within a few weeks we appear to have gone from Japan being lauded for printing to now apparent fears that the printing in Japan will cause a crash which will rippled throughout the global financial system?

Is this just people filling copy or is there any serious risk of disaster - and how will it affect HPCers?

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So how likely is it that Japanese printing will create some kind of panic in the global markets?

Within a few weeks we appear to have gone from Japan being lauded for printing to now apparent fears that the printing in Japan will cause a crash which will rippled throughout the global financial system?

Is this just people filling copy or is there any serious risk of disaster - and how will it affect HPCers?

Rates went from 1.6 one month ago to 2.0 yesterday and are predicted to hit 2.3% shortly (Coutts)

3% would send the UK to the IMF.

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Is this just people filling copy or is there any serious risk of disaster - and how will it affect HPCers?

I'll take anything over what we've got now. Even if it means losing some of my savings, provided UK house prices fall considerably more. FLS and Osbornes schemes Help-To-Buy to support house prices can't overcome forces in global markets, with a new for rebalancing house prices to allow younger people to buy and upsize at a price they can afford without epic/unrepayable debt.

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Found this on the FT:

"The worst month for US Treasuries in two years was on Friday capped by investors pulling back from the government bond market , on concerns that an improving economy will prompt the Federal Reserve to rein in its hefty stimulus.

The turmoil was echoed in fixed-income markets around the world as higher yields for government securities in the US, Japan, Germany and UK hit prices for corporate and emerging market debt and also US mortgage-backed bonds.

The 10-year Treasury yield rose to 2.20 per cent on Friday, up from around 1.60 per cent at the start of May. In the UK, benchmark yields this week rose back above 2 per cent for the first time since February, while yields in Germany and Japan are sharply higher over the past month."

Higher yields have to return. And like most things it will not happen as predicted.

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Found this on the FT:

"The worst month for US Treasuries in two years was on Friday capped by investors pulling back from the government bond market , on concerns that an improving economy will prompt the Federal Reserve to rein in its hefty stimulus.

The turmoil was echoed in fixed-income markets around the world as higher yields for government securities in the US, Japan, Germany and UK hit prices for corporate and emerging market debt and also US mortgage-backed bonds.

The 10-year Treasury yield rose to 2.20 per cent on Friday, up from around 1.60 per cent at the start of May. In the UK, benchmark yields this week rose back above 2 per cent for the first time since February, while yields in Germany and Japan are sharply higher over the past month."

Higher yields have to return. And like most things it will not happen as predicted.

Um, dummies question - why is this happening now? Why all of a sudden? Is it due to Japan and fears about its printing or is it because there are signs, apparently, of a recovery in the US?

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Um, dummies question - why is this happening now? Why all of a sudden? Is it due to Japan and fears about its printing or is it because there are signs, apparently, of a recovery in the US?

There's no recovery in the US. US inflation continues to fall. Core inflation hit 1.05% last month, an all-time low for the index. The US economy is once again at risk of slipping into a protracted deflationary slump. The global economy has similarly slowed to a crawl, overwhelmed by debt-carry costs, the effects of QE and capital misallocation. More people are being born into poverty than lifted out of poverty for the first time since the 1960s. For me, the immediate explanation has to be Japan and the growing perception that the BoJ is at the mercy of events and no longer in control of them.

US core inflation:

Core+PCE.PNG

Edited by zugzwang

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More people are being born into poverty than lifted out of poverty for the first time since the 1960s.

The good news is that there are more billionaires in the world than ever before.

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There's no recovery in the US. US inflation continues to fall. Core inflation hit 1.05% last month, an all-time low for the index. The US economy is once again at risk of slipping into a protracted deflationary slump. The global economy has similarly slowed to a crawl, overwhelmed by debt-carry costs, the effects of QE and capital misallocation. More people are being born into poverty than lifted out of poverty for the first time since the 1960s. For me, the immediate explanation has to be Japan and the growing perception that the BoJ is at the mercy of events and no longer in control of them.

Deflation does not equal slump. If you look at the 90s when the US economy saw strong growth inflation fell steadily.

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i think its interesting that that bond yields may rise in the US because the government is going to stop printing and buying bonds which will bring down prices.

in japan on the otherhand the government is going to engage in massive QE, which may stoke inflation, however with domestic investors holding most of japans debt, japanese investors are selling out, probably faster than japan will be printing, which too will will drive up bond yields.

so we may see rising yields and increased costs of government borrowing because of stopping printing in the US and too much printing in japan. this suggests that no matter what the central banks do, bonds are in a bubble, and its going to pop at some point.

the market has had enough and the distortions cant continue much longer. real risk and real prices need to return to the bond markets, it can only be artificially held up for so long.

Edited by mfp123

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i think its interesting that that bond yields may rise in the US because the government is going to stop printing and buying bonds which will bring down prices.

in japan on the otherhand the government is going to engage in massive QE, which may stoke inflation, however with domestic investors holding most of japans debt, japanese investors are selling out, probably faster than japan will be printing, which too will will drive up bond yields.

so we may see rising yields because of stopping printing in the US and too much printing in japan. this suggests that no matter what the central banks do, bonds are in a bubble, and its going to pop at some point.

the market has had enough and the distortions cant continue much longer. real risk and real prices need to return to the bond markets, it can only be artificially held up for so long.

The inflation/deflation debate is not done yet, 5 years after the start of the crash. The deflationistas' bond vigilantes have been bought off by QE front runnning for 5 years now.

In the event that QE does fail (and before it does, they'll try a good few more rounds yet), the question is: what would the central bankers then try next? Because if the past five years has taught us anything, it's that they won't just let deflation happen.

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The inflation/deflation debate is not done yet, 5 years after the start of the crash. The deflationistas' bond vigilantes have been bought off by QE front runnning for 5 years now.

In the event that QE does fail (and before it does, they'll try a good few more rounds yet), the question is: what would the central bankers then try next? Because if the past five years has taught us anything, it's that they won't just let deflation happen.

i think japan is the place to watch as a kind of canary in the mine.

if japan engages in massive printing, and yet conversely bond yields rise, its going to fire a warning shot to central banks that they cant just influence the markets as they please. every action has a reaction, and japanese bond holders are savvy to what QE means for the value of their bonds.

if bond holders in the west were really savvy not short-termist - theyre basically happy to hold government bonds because they think the central banks have no choice but to buy them off them at higher price so they dont care about the yield (its like buying a BTL house for the capital gain not the rental yield), what you may see is bondholders start to factor out government intervention to find the true price of a bond.

the market might start to say ok the government is buying X amount, which means the market is only buying y amount and so set a real market bond yield based on the y amount (which is what we may be seeing in japan).

keep your eyes peeled on japan, because the bond market there is absolutely massive. if japan loses control of its bonds and debts it will implode, 230% debt to GDP, mostly owned domestically and it also has to tap the domestic market to refinance 15% of its debt every year.

japan has to spend 25% of its budget servicing the interest on debt every year. a doubling of bond yields to just 2% means it will spend 50% of its budget on interest payments.

Edited by mfp123

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i think japan is the place to watch as a kind of canary in the mine.

if japan engages in massive printing, and yet conversely bond yields rise, its going to fire a warning shot to central banks that they cant just influence the markets as they please. every action has a reaction, and japanese bond holders are savvy to what QE means for the value of their bonds.

if bond holders in the west were really savvy not short-termist - theyre basically happy to hold government bonds because they think the central banks have no choice but to buy them off them at higher price so they dont care about the yield (its like buying a BTL house for the capital gain not the rental yield), what you may see is bondholders start to factor out government intervention to find the true price of a bond.

the market might start to say ok the government is buying X amount, which means the market is only buying y amount and so set a real market bond yield based on the y amount (which is what we may be seeing in japan).

keep your eyes peeled on japan, because the bond market there is absolutely massive. if japan loses control of its bonds and debts it will implode, 230% debt to GDP, mostly owned domestically and it also has to tap the domestic market to refinance 15% of its debt every year.

japan has to spend 25% of its budget servicing the interest on debt every year. a doubling of bond yields to just 2% means it will spend 50% of its budget on interest payments.

Isn't the Japanese gubbermint debt massively higher (as a %age of GDP) than the west's? If so, isn't this an indication that the Fed & BoE can print a lot more money (double, triple?) before they run into the same problems? Or does the balance of trade (somewhat?) negate this?

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Isn't the Japanese gubbermint debt massively higher (as a %age of GDP) than the west's? If so, isn't this an indication that the Fed & BoE can print a lot more money (double, triple?) before they run into the same problems? Or does the balance of trade (somewhat?) negate this?

japan is way down the road to where we are but, its more a case of if the central bank in japan loses control of the bond markets, central banks in the west will also shit themselves and think the markets can turn on us if we dont act properly. printing money and using QE is artificially cheating the bond market system and markets may wake up and come round to responding in kind to it.

the logical cental bank thinking is if japan prints money with QE, bond prices will rise and yields should fall, but japanese holders maybe sticking 2 fingers up at it and exiting the system causing yields to rise instead. if this happens it flips QE on its head. thats why we should keep a keen eye out on what happens there.

Edited by mfp123

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Surely the central banks have achieved what they wanted? Floor under house prices, Stock market bubble, but commodities and inflation not gathering.

Of course, in the real economy unemployment is high, wages stagnating, but thats just a continuation of the previous 30 years that they've been more than happy with.

As far as i can see, theyve achieved what they wanted to achieve.

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  • 242 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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