Treasury Repo Index Explodes And US Treasury Curve Kinks

By Anthony B. Sanders

U-3 Unemployment And The UST 10Y-2Y Slope

The first trading day of 2019 comes in with a … bang.

First, the US Treasury Repo index exploded.

repocurve

And the US Treasury curve has developed a serious kink between the one year tenor and 3 year tenor. Better known as curve inversion.

Continue reading Treasury Repo Index Explodes And US Treasury Curve Kinks

T-Bond Blowoff Top Signaled

By Tom McClellan

Corporate bond McClellan A-D Oscillator

T-Bond prices have had a nice run upward since the lows in October and November 2018, but now we are seeing an important indication of a blowoff top, suggesting bond prices will not be able to continue higher from here.

The indicator in this week’s chart is a Ratio-Adjusted McClellan A-D Oscillator for high grade corporate bonds.  The A-D data as well as the determination of which bonds are high grade is as provided by FINRA.  And see this article for a description of the difference between a Ratio-Adjusted McClellan Oscillator and the classic version.

Like the McClellan Oscillators for the NYSE and Nasdaq markets, this one for high grade corporate bonds tends to go positive in uptrends, and negative in downtrends.  And it also can show us overbought and oversold conditions.  Right now we are seeing a really overbought reading, among the highest of the last 3 years.

Continue reading T-Bond Blowoff Top Signaled

Are Treasury Yields Rising TOO Fast?

By Anthony B. Sanders

MOVE And Tyvix Spike (Do The Fed Tighten Up?)

Bridgewater Founder Ray Dalio said back in January 2018 that “A 1 percent rise in bond yields will produce the largest bear market in bonds that we have seen since 1980 to 1981.” 

Well, we are still in a higher bond duration section of the Price/Yield curve where further increases in yield shifts can clobber Treasury prices.

duration10.png

Like the recent decline in 10-year Treasury Note prices.

Continue reading Are Treasury Yields Rising TOO Fast?

10-Yr US Treasury Notes Net Non-Commercial Futures Positions Hit All-time Negative

By Anthony B. Sanders

10Y-2Y Slope Flattens To Lowest Since 2007

The 10-Yr US Treasury Notes Net Non-Commercial Futures Positions just hit the all-time negative.

netshortss.png

And the 10Y-2Y Treasury yield curve slope just flattened to the lowest level since 2007.

Continue reading 10-Yr US Treasury Notes Net Non-Commercial Futures Positions Hit All-time Negative

U.S. Set To Sell $26 Billion of 2028 Notes Wednesday

By Anthony B. Sanders

The Largest Auction Of 10-year Treasuries Ever!

The U.S. is set to sell $26 billion of 2028 notes Wednesday, the largest auction of 10-year Treasuries ever and eclipsing the previous record of $25 billion, first set in 2009. The sale follows last week’s quarterly refunding announcement, which saw the Treasury once again amp up issuance plans to finance the widening federal budget deficit.

10yaucrec

The US debt explosion jumped in 2007 and never returned to the old trajectory.

Continue reading U.S. Set To Sell $26 Billion of 2028 Notes Wednesday

Breakevens, TIPs and Other Harsh Realities

By Kevin Muir

I was early in calling for an increase in breakevens and a decline in bond prices. No denying it. But at least I stuck with it and didn’t get shaken off. Heck, I even reiterated the call earlier this year – Breakeven Refresher Lesson.

Since then, breakeven inflation rates have been steadily rising.

So here we are with the market finally pricing in increased inflation rates. Whereas a couple of years ago pundits were filled with worries about disinflation, today the opposite concern dominates financial airwaves.

Has the market gotten ahead of itself? Or is inflation about to take off?

Continue reading Breakevens, TIPs and Other Harsh Realities

All Eyez on 3

By Heisenberg

Well, it looks like it’s going to be all about 3% on 10s on Monday, or at least early on.

The selloff in the long end late last week and accompanying steepening has everyone squarely focused on that oh so scary round number again and yields ticked up a bit more overnight, ensuring that your coworkers will be forced to begrudgingly try and come up with some new factoid about 3% so they can impress their colleagues.

10Y.png

The dollar rose for a fifth consecutive session as yields are underpinning the greenback with folks apparently willing to overlook (for now) the deficit issue and the fact that Trump has adopted a weak dollar policy by proxy. Of course positioning shows no one is actually “ignoring” the developing structural headwinds.

Continue reading All Eyez on 3

Treasury Market Volatility Back Near Record Lows

By Anthony B. Sanders

That’s The Way The Fed Likes It

Treasury market volatility is back near record lows. That’s the way The Fed likes it.

(Bloomberg) Volatility in the Treasuries market is subdued, according to Bank of America Merrill Lynch’s MOVE Index. The measure of anticipated price swings in the U.S. securities dropped below 50 on Monday for the first time in three months, putting it closer now to its record low of about 44 than it is to its high for the year of about 72 in early February. The decline may suggest traders increasingly doubt the Federal Reserve will follow through on its plan to raise interest rates at least two more time this year.

move041818.png

Here is the MOVE index since 2007 where you can see the financial crisis and The Fed’s response by extinguishing volatility.

Continue reading Treasury Market Volatility Back Near Record Lows

TreasFest! $30 Billion Treasury 2Y Note Auction Draws Yield Of 2.31%, Highest Since 2008

By Anthony B. Sanders

Treasury’s $30 billion two-year U.S. note sale drew a yield of 2.31 percent, the highest since 2008, with a bid-to-cover ratio of 2.91, in line with the average over the past 10 auctions. Indirect bidders, a class of investors that includes foreign central banks and mutual funds, bought 44.5 percent, down from the 49.7 percent average. Direct bidders purchased 14.1 percent.

t3auc.png

That left primary dealers, which are obligated to bid at auctions, with 41.3 percent, the largest share since December.

Continue reading TreasFest! $30 Billion Treasury 2Y Note Auction Draws Yield Of 2.31%, Highest Since 2008

30-year Treasury Auction Strong With $13 Billion Sold To Public (None Bought By The Fed)

By Anthony B. Sanders

[Yesterday’s] US Treasury 30-year bond auction was strong. $13 billion were sold to the public  and none purchased by The Fed for the first time since the December 12, 2017 auction.

30yauc

So far, so good. Despite massive Federal spending and projected budget deficits, Treasury auctions are going well.

Continue reading 30-year Treasury Auction Strong With $13 Billion Sold To Public (None Bought By The Fed)