When does the yield on US Treasuries blow out?

[Mr Z]

I'd be guessing that is because they where trading a certain series at any given time so the only real variable that they can consider is price. Which at any given point in time is the only variable with in the markets control. It's not like price is going to move and not impact yield.... time decay is a known curve.

 

[Trembling Hand]

I'd be guessing that is because they where trading a certain series at any given time so the only real variable that they can consider is price.

Yes of course.

 

[sinner]

Sinner your website for dummies is wrong. I've sat on a few desks with active bond traders and have never heard them quote yield that they bought/sold. Always the price.

Hi TH,

I used to follow acrossthecurve.com before the guy stopped around this time last year due to a new job at TDS.

Check it out, http://acrossthecurve.com/

He used to post nightly market recap, always quote the yield, never the price.

Go look at bondtraderforum.com, tell me whether you see traders there quoting in price or yield.

Here is just one quick example I pulled
http://bondtraderforum.com/30-year-moving-up-t119.html

Go look at Bloomberg market recaps, tell me if they quote the price or yield.

 

[Mr Z]

Doesn't make what I said wrong.

Have we pee'd far enough up the wall for you yet?

 

[Trembling Hand]

Sinner my point is that people who actually trade Bonds talk about price when they are talking about their trades. Backing up Mr Z words about his trade in my experience.

I know bloomberg talk about yield so what? They are talking to retail punters. I'd expect the links you posted also are talking to the same audience.

Of course you're right though. After all you got it off the Internet. Thats always right! That is why people in piss-ant admin jobs can talk like masters of the universe after they finish their day job. I love the internet. We can all be winners

Carry on,,,

 

[Mr Z]

I guess if you are talking 10 year treasuries, all maturities, the only common reference point is yield because they vary across the board. If you are trading a particular series then all the other variables are known so price becomes the main issue. So yeah, I can see how it should vary depending on the context and the audience but to say there is only one valid way to discuss bond value is a bit of a stretch IMO.

Anyway... the point being, it looks like, maybe we have a turning point around here somewhere... give or take. Vague enough? LOL...

Smile guys... it's only money... and what I lose was all mine... for a while!

Thanks TH.

 

[sinner]

Brian Sack spoke yesterday:

"The upward movement in longer-term interest rates in large part reflects the greater optimism among investors about the outlook for economic growth and the gains do not signal greater worry about inflation."

My reply:
Let's ask the investors, shall we?
The high in bond prices was late August. So we can look at TIP vs TLT on a 120 day relative basis (I expanded the scope to 123 days to capture the actual high close in TLT).

Obviously, inflation is exactly what investors are worried about. Hell, a long TIP short TLT trade the day QE2 was announced would have essentially a bet on the CPI that paid 14%, if I'm not mistaken?

 

[IFocus]

Brian Sack spoke yesterday:

"The upward movement in longer-term interest rates in large part reflects the greater optimism among investors about the outlook for economic growth and the gains do not signal greater worry about inflation."

My reply:
Let's ask the investors, shall we?
The high in bond prices was late August. So we can look at TIP vs TLT on a 120 day relative basis (I expanded the scope to 123 days to capture the actual high close in TLT).

Obviously, inflation is exactly what investors are worried about. Hell, a long TIP short TLT trade the day QE2 was announced would have essentially a bet on the CPI that paid 14%, if I'm not mistaken?

Sinner did you take the trade?

 

[sinner]

Sinner did you take the trade?

Nope, not my style, just thought it was worth pointing out that Sack is audaciously bull****ting in front of obvious data.

Unless someone can point out a different reason the huge discrepancy between TIP and TLT?

TIP has been steadily pricing in inflation since late '09 and only started to break down again during late August '10 in which lots of countries bonds made highs (yield lows).

But that break down has really not been much compared to that of non inflation protected treasuries.

Funny how the price curve of gold and TIP doesn't look that different...

 

[Bushman]

Finally, the great rotation is really taking off on tapering talk. Yield curve is steepening in the US. Goldman's expecting 4% on 10-yr Treasuries by 2016.

'The 10-year Treasury note had its yield outlook raised by Goldman Sachs on Sunday.

The investment bank hiked its expectations for the trajectory of the benchmark note, projecting yields hitting 4% by 2016, largely based on an improving U.S. economy, an anticipated winding down of the Federal Reserve’s bond-purchase program, and fewer systemic risks in the euro zone, according to Goldman’s Francesco Garzarelli.'

Interesting that the US is tightening while Europe and England are easing. Surely the US cannot allow that to happen. So will there be an 'untaper' of the taper soon?

 

[kid hustlr]

What's the linkages between QE ending and the US yield curve steeping?

My understanding is generally yield curves steepen during an easing cycle as they buy the front end (short end prices in more rate cuts, back end less affected)

In this case I feel the curve has steepened as they have sold the back more than the front.

I mean practically it makes sense, (10 year is the most liquid) but just wondering if from an economic theory perspective there is a reason why.