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    Crazy Financials today....

    Without going cave on this, and if I'm overstepping my bounds let me know, but we are having some crazy activity today. The Euro is pounding the dollar. Bernanke bought 7 billion in treasuries again, there will be 100 billion auctioned next week, and the reaction has been crazy. The index on 10-Year treasuries is 3.36 right now which is astronomically high. It sounds like ECB's are selling off today, in a wire item from Reuters:

    [11:41 US GOVTS: Real Money Using Coupon Passes To Exit; FM Blast] Boston, May

    21. There apparently is a new wrinkle to the intermediation trade between buying from Treasury to sell to the Fed with real money, including central banks, now in on the act. Indeed, several Street sources relay central banks were aggressive offers into this morning's coupon pass, with one letting go of a large block of old 5-years. Other offers too are coming in from embedded Asian real money longs -- in the higher coupons -- also looking to sell size without unduly upsetting the market, and especially considering the illiquidity in off- the-run bids from the Street.

    Whether influenced or not by the much higher tenders coming in on the Fed
    Passes ($45 bln tendered for $7.4 bln bought in today's pass for a 16.2% hit
    rate), fast money has been tattooing the bid and especially so in the belly with the 10-year most leaned on. Note as well, earlier this week the Bank of England (BoE) gilt pass too saw a need to offer paper at or below the market's bid side in order to get sales off.

    Obviously, this is not a very supportive situation for the treasury market,
    if previous sponsors are heading for the exits in a fairly sizeable manner. With this, and $101 bln in supply next week (and another $70 bln in 3s, 10s and 30s to be announced the week after)look for more downside action. Q-E III anyone?

    Kenneth.Logan@Thomsonreuters.com/db/mc
    I'm more of a tinfoil hat guy than most but this is just crazy activity. Some interesting historical notes on 10 year treasuries -

    1853 : 10-year treasury yield : 3.4
    1929 : 10-year treasury yield : 3.3

    I think most are aware of what happened in those years. I'm not an expert on this so I'd like to get some discussion going on it but this is an interesting day and I'd like to know if I shouldn't worry about it or if I should go buy some canned goods after work.

    Edit: Mods, feel free to move if it is more in line with the Cave.


    Last edited by BryceC; 05-21-2009 at 01:54 PM.


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    Re: Crazy Financials today....

    I went to a presentation given by an Economist last week.

    He talked about this happening. To me, it isn't anything too crazy after seeing the data the drove this. He talked about the 10yr rising, and also the Euro will likely perform better than the dollar.

    He also said that the S&P should be more at 800 than 900, so if that drops do not freak out.

    I wouldn't be freaking out at the moment in general. We're going to be in this until 2012 or 2013 probably...



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    Re: Crazy Financials today....

    I'm an engineer/lawyer by training so let me ask a dumb question. Does this data indicate that we are having trouble selling our t-bills? If so, isn't that really, really bad? If we can't finance our debt we are screwed right?


    “Science investigates; religion interprets. Science gives man knowledge, which is power; religion gives man wisdom, which is control. Science deals mainly with facts; religion deals mainly with values. The two are not rivals. They are complementary.”

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    Re: Crazy Financials today....

    Same question I have. When you are in debt you are somebody else's biatch. Personal debt or national debt. Doesn't matter.



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    Re: Crazy Financials today....

    When you say "the euro is pounding the dollar today", what do you mean? Here is what I'm seeing today

    +0.0084 (0.61%)1.3890 euro vs USD.

    I've seen it move a lot more in one day.



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    Re: Crazy Financials today....

    Are mortgage rates still loosely tied to 10 yr treasuries or is the 'Great Magical Fed Money Machine' subsidizing those now ?

    Lets see Wells Fargo et all put up good numbers if they aren't doin refis...



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    Re: Crazy Financials today....

    Quote Originally Posted by matmann22 View Post
    Are mortgage rates still loosely tied to 10 yr treasuries or is the 'Great Magical Fed Money Machine' subsidizing those now ?

    Lets see Wells Fargo et all put up good numbers if they aren't doin refis...
    As a resident of DM, I hope Wells Fargo does great financially. I don't always agree with their tactics but they mortgage division is a big part of the DM economy.



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    Re: Crazy Financials today....

    Quote Originally Posted by Incyte View Post
    I'm an engineer/lawyer by training so let me ask a dumb question. Does this data indicate that we are having trouble selling our t-bills? If so, isn't that really, really bad? If we can't finance our debt we are screwed right?


    I think there is a thread in the Cave about a recent T-Bill auction that didn't go so well...


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    Re: Crazy Financials today....

    The primary dealers offered 45 billion for sale and the Fed took 7 billion. Next weeks auction of 100 bil is going to be wild. Imo, Ben will have to be a buyer. Note the action in gold today.



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    Re: Crazy Financials today....

    Quote Originally Posted by Incyte View Post
    I'm an engineer/lawyer by training so let me ask a dumb question. Does this data indicate that we are having trouble selling our t-bills? If so, isn't that really, really bad? If we can't finance our debt we are screwed right?

    Wait till the dollars/US loses our triple a rating which is coming anytime now.

    You are correct about a coorlation between interest rates and ease of finiancing. Just like any other debt transaction the riskier the chance of payback the higher the lender wants to charge.



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    Re: Crazy Financials today....

    3.36% interest on the 10 year treasury note is not 'astronomically high'. Historically, it's actually pretty low. 2 years ago, before the market started down, the interest on this note was about 4%. That is pretty normal for that note. At the time, that corresponded to 6% on a 30 yr fixed rate mortgage for those with good credit. 3.36 indicates that US debt is still viewed fairly favorably vs other bonds available globally. The trend however, which is up from a low of 2% around the first of the year, indicates US debt is getting less attractive than it was 5 months ago. I don't think the day is far off when the US will be paying 4% (and much more) to get global investors to buy these notes.



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    Re: Crazy Financials today....

    Quote Originally Posted by jbhtexas View Post


    I think there is a thread in the Cave about a recent T-Bill auction that didn't go so well...

    Do you mean the thread didn't go well or the auction didn't go well? I haven't had much time to look around today.



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    Re: Crazy Financials today....

    Quote Originally Posted by dmclone View Post
    As a resident of DM, I hope Wells Fargo does great financially. I don't always agree with their tactics but they mortgage division is a big part of the DM economy.
    I like this attitude. It's the same thing with Principal, you hate to see bad news about them because between them and Wells there are a lot of people in DM employed by them. You want them to be hiring a bunch of people not laying off or handing out paycuts because the better those 2 giants do the more the DM economy in general is going to benefit.


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    Re: Crazy Financials today....

    First off, thanks for the clarification guys. I really wasn't trying to make some sweeping statement. I honestly am trying to learn here.

    Quote Originally Posted by matmann22 View Post
    Are mortgage rates still loosely tied to 10 yr treasuries or is the 'Great Magical Fed Money Machine' subsidizing those now ?

    Lets see Wells Fargo et all put up good numbers if they aren't doin refis...
    Everything I've read in relation to this is that mortgage rates are going to rise.




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    Re: Crazy Financials today....

    Quote Originally Posted by MilehighClone View Post
    The primary dealers offered 45 billion for sale and the Fed took 7 billion. Next weeks auction of 100 bil is going to be wild. Imo, Ben will have to be a buyer. Note the action in gold today.

    Oh joy...Our national bank is going to be buying our nations debt. This is going to end well...



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