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Hey Guys,
Saw this on Market ticker and its kind of interesting... Would love some input from the itulip folks, would love to hear EJ's/FRED's thoughts as well....
http://market-ticker.denninger.net/a...ts-Beware.html
Since EJ and most folks here (myself included) are betting on inflation, i would like someone to help me make sense of this argument... With these treasury sales results are FCB's betting on deflation? AND if so, can they make it happen? Perhaps we can discuss this data point as i believe EJ likes to look at data and use it to evaluate his thesis....
Saw this on Market ticker and its kind of interesting... Would love some input from the itulip folks, would love to hear EJ's/FRED's thoughts as well....
http://market-ticker.denninger.net/a...ts-Beware.html
Median yield down, primary dealers took about half and indirect bidders took the other half, basically.
What? 50% take for foreign central banks on 30y debt at a 4.6ish coupon?
That makes no sense given what we're being told is coming: massive inflation, maybe even hyperinflation, commodities ramping to the moon, the stock market going to the moon in a hyper-inflationary printing explosion.
The stock market rocketed on the release. I couldn't make sense out of the initial FX moves, especially in the DX and Yen. Someone was front-running in the financials bigtime as well, with a big ramp for an hour or so prior to the results.
Folks, if you think hyperinflation is coming, or even serious inflation, you're going to get your head cut off on a 4.6% 30y bond. In fact you could easily lose half or more of your investment, should you need to sell, and your coupon will be half or less of what it should be.
So how does this make any sense?
There is only one reason for the FCBs to want this sort of exposure:
They expect a ramp in the dollar and crushing DEFLATION, as this is the only way that bet will pay off.
If you're on the other side of this trade in any way, I hope you are putting on some sort of hedge.
Remember, foreign central banks can FORCE a pull in liquidity and make their desires a self-fulfilling prophecy.
Care to bet against someone who can make their bet pay off?
That's what I thought.....
Oh guess what - the primary dealers would like this outcome too......
PS: If this analysis is correct then we're in for some really NASTY trouble, quite soon. If you're short Ts, short dollars or long equities, your neck is in the guillotine. Better move before the blade falls!
What? 50% take for foreign central banks on 30y debt at a 4.6ish coupon?
That makes no sense given what we're being told is coming: massive inflation, maybe even hyperinflation, commodities ramping to the moon, the stock market going to the moon in a hyper-inflationary printing explosion.
The stock market rocketed on the release. I couldn't make sense out of the initial FX moves, especially in the DX and Yen. Someone was front-running in the financials bigtime as well, with a big ramp for an hour or so prior to the results.
Folks, if you think hyperinflation is coming, or even serious inflation, you're going to get your head cut off on a 4.6% 30y bond. In fact you could easily lose half or more of your investment, should you need to sell, and your coupon will be half or less of what it should be.
So how does this make any sense?
There is only one reason for the FCBs to want this sort of exposure:
They expect a ramp in the dollar and crushing DEFLATION, as this is the only way that bet will pay off.
If you're on the other side of this trade in any way, I hope you are putting on some sort of hedge.
Remember, foreign central banks can FORCE a pull in liquidity and make their desires a self-fulfilling prophecy.
Care to bet against someone who can make their bet pay off?
That's what I thought.....
Oh guess what - the primary dealers would like this outcome too......
PS: If this analysis is correct then we're in for some really NASTY trouble, quite soon. If you're short Ts, short dollars or long equities, your neck is in the guillotine. Better move before the blade falls!
by cjppjc
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