Bonds & Interest Rates

Buy On The Cannons. Sell On The Trumpets.

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US Treasury 10-year yields recently hit seven year highs. In the case of bonds, getting high is not a good thing; it means that the value of your bond is declining. It means that the cost of your debt is increasing. It means that the leverage you have used since 1980/81 to make a pile of dough in real estate is turning against you…. CLICK for complete article

Buy On The Cannons. Sell On The Trumpets.

charts

US Treasury 10-year yields recently hit seven year highs. In the case of bonds, getting high is not a good thing; it means that the value of your bond is declining. It means that the cost of your debt is increasing. It means that the leverage you have used since 1980/81 to make a pile of dough in real estate is turning against you…. CLICK for complete article

I Was Asked: Why Did All this Money-Printing Not Trigger Massive Inflation?

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I was asked two important questions in this mind-boggling era of QE: The Bank of Japan has monetized 50% of its national debt; so why has there not been a surge of inflation? And why can’t the Fed restart QE and do the same without triggering inflation? CLICK for complete article

Are U.S. Bonds The Next Big Investment Trend?

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U.S. bond yields have surged quite dramatically over the past 12 months, with the 10-year Treasury yield having increased 30 percent while that of the 2-year Treasury has almost doubled. Despite the rapid increase, yields are still well below their historical averages…. CLICK for complete article

Turkey’s Benchmark Bond Hits A 20% High

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After the lira, it’s the turn of Turkish government bonds.

The nation’s benchmark 10-year notes slid, sending yields to a record high, as investors increasingly concerned by a lack of central bank moves to backstop the nation’s assets sought higher risk premiums. The lira won a brief respite after slumping the most since an attempted military coup in 2016…. CLICK for complete article

Spotlight on the Timing of Treasury Shorts

 

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September 5, 2017 with the 10-year yield at 2.04%, was an excellent time to short 10-year treasuries. The number of speculative net short contracts was only 62,634. 

On January 2, the speculative net short position rose to 292,210 contracts with the yield up to 2.45%.

On April 17, at a yield of 2.88%, there were 543,822 net short contracts.

On July 24, with the yield barely rising to 2.97%, there were 698,504 net shorts contracts. That’s an increase of 154,682 with the yield essentially moving sideways. 

Larger Picture

The above just describes changes in net positioning. It’s highly likely some of those who shorted early on have taken profits while others added to shorts and still others took positions for the first time. 

The number of short contracts is a whopping 1,557,271 contracts. 

The number of long speculative contracts is 858,767 so there may be a pile of hurting longs ready to throw in the towel on a move higher in yields as well. I suppose it would be fitting if one final blast higher in yields shook out the longs right before a reversal.

Congrats to those who shorted early and got out. 

It’s the short latecomers and those pressing shorts after this rally in yields that will eventually blow up. Some longs may also be on the edge right now. 

Mike “Mish” Shedlock