In the past four years we've all lived in a sort of Nirvana-like state where equities go up everyday and somehow government bond yields go lower too. For sometime, I've been troubled by the weird relationship many markets have maintained because the activity of the "new-normal" period we've had just doesn't conform to historical norms.
We've had strange intra-market relationships between US government bonds and equity markets, US currency and the stock and bond markets, and even odd performance relative to emerging markets. In the past week or two though, some interesting developments have occurred which probably tie closely to the Fed hinting that they may taper or begin to taper purchases of bonds and mortgage backed securities.
SELL EM IF YOU'VE GOT EM!
To get the work week started, please take a look at the following screenshots of the government bond price action this morning. While stock markets are moving up (as they should) when government prices are going down (yields are up), I'm a bit alarmed as these are HUGE moves. The ten year treasury moving 5% in any direction is massive and can't be good for those hedge funds and insurance companies that are leveraged and positioned the wrong way.
Not to be out done, Japanese bonds are also getting clobbered. I wonder if the Japanese Central Bank has unlimited QE ready, it looks like they are going to need it.
US Tips (Treasury Inflation Protected Securities) are also getting smacked around too, so it would seem there is nowhere to hide in government bonds today.
GOATMUG
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