It's Ugly Today Everyone
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It's Ugly Today Everyone
Posted by BennyAndTheInkJets on 6/24 at 9:15 am
Can't get too into it but dealers aren't really wanting to make markets, players are on the sidelines, retail is pulling, passive funds are getting outflows and are forced sellers into this volatility. The sell-off is very exacerbated from unwinding of carry trades, risk parity funds having to sell to stay within their volatility targets, and passive funds getting outflows and naturally being forced sellers.

These rate levels can help some of those that were hurt by low rates (mortgage originators, commercial banks), but its a moot point until volatility slows down. Hopefully this is just taking care of the outflows from last week, we need this volatility to stabilize.



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Posted by Coeur du Tigre on 6/24 at 11:13 am to BennyAndTheInkJets
quote:

These rate levels can help some of those that were hurt by low rates (mortgage originators, commercial banks)...

By 'rate levels', do you mean yield? Thanks.



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Posted by ZereauxSum on 6/24 at 11:13 am to BennyAndTheInkJets
I've turned off the ticker on my phone. I can't even watch :vomit:

What's your gut on where we are headed over the next 3-6 months?

ETA: Wealth Mgmt at the bank I work at seems to be pretty pessimistic. The lenders are happy to see higher rates on the horizon though.


This post was edited on 6/24 at 11:18 am

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Posted by BennyAndTheInkJets on 6/24 at 12:48 pm to Coeur du Tigre
quote:

By 'rate levels', do you mean yield? Thanks.

For all intents and purposes, you can view these interchangably. Yields should match the most recent issuance coupon. Going deep into the differences wouldn't really be beneficial, as like I said they are the basically the same thing when it boils down to it.



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Posted by BennyAndTheInkJets on 6/24 at 12:53 pm to ZereauxSum
quote:

What's your gut on where we are headed over the next 3-6 months?

Leverage is unwinding right now, it really depends on flows. If flows stay stable/constant/not horrible by the time most of these funds stop selling as forced sellers we may be alright. I've been one of the biggest Bernanke supporter I know but I'm not sure why he made the points he did on Wednesday. There were a lot of "ifs" before he said taper in 2013 and end in 2014, but the market immediately took it as "TAPER 2013! END 2014!!!11!one!11!!". Some talk is that the hawkish governors are getting louder, and some of them are speaking this week so I'll be following that.

Equities have held up pretty good. EM and other fixed income classes have just gotten completely smoked. Starting to look like some good opportunities but nobody wants to catch a falling knife.



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Posted by Coeur du Tigre on 6/25 at 3:12 am to BennyAndTheInkJets
quote:

For all intents and purposes, you can view these interchangeably. Yields should match the most recent issuance coupon. Going deep into the differences wouldn't really be beneficial, as like I said they are the basically the same thing when it boils down to it.

Ok, thanks. I was worried that you meant 'the most recent issuance coupon[s]' were going up.

quote:

Leverage is unwinding right now...

Best news of the day.



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Posted by Janky on 6/25 at 6:18 am to BennyAndTheInkJets
quote:

but the market immediately took it as "TAPER 2013! END 2014!!!11!one!11!!".


This is what has confused me the most. Bernanke has stated what his plans are, but the market seems to think he is lying and he will be more aggressive than what he says.



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Posted by BennyAndTheInkJets on 6/25 at 8:00 am to Coeur du Tigre
quote:

Ok, thanks. I was worried that you meant 'the most recent issuance coupon[s]' were going up.

Well were going to have some Treasury auctions this week so expect coupons to be higher.



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Posted by BennyAndTheInkJets on 6/25 at 8:08 am to Janky
quote:

This is what has confused me the most. Bernanke has stated what his plans are, but the market seems to think he is lying and he will be more aggressive than what he says.

That's just the market, its completely irrational and we know the Keynes quote "The market can stay irrational longer than you can stay solvent".

Hawk governors Fisher and Kocherlakota spoke yesterday and gave a little more clarity. Kocherlakota was actually pretty good. Kocherlakota paraphrased: "We're fine with this movement in the short-term, but not if it continues. Don't expect the Fed to go from Wild Turkey to cold turket overnight". Fisher used to be a hedge fund manager himself. He akinned the market participants that are trying to move it to where the Fed hops back in to feral hogs and made the comparison to '92 when Soros and others attacked the Bank of England to the point that England had to leave the European exchange rate mechanism.

I hope we can stabilize here.



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Posted by ZereauxSum on 6/25 at 8:29 am to BennyAndTheInkJets
quote:

We're fine with this movement in the short-term, but not if it continues. Don't expect the Fed to go from Wild Turkey to cold turket overnight"


This will hopefully ease the markets and reinforce the idea that there isn't really a commitment to tapering, just a possibility if certain conditions are met.

quote:

I hope we can stabilize here.


You and me both. Good info sir



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Posted by Blakely Bimbo on 6/25 at 9:36 am to BennyAndTheInkJets
The action in TIPS is screaming D E F L A T I O N.

Ugly chart.

The 2007-08 debacle took about 18 months. Are we in for another round? Who the heck knows. One just has to pay a whole lot of attention like minute by minute until we will get a clearer picture.

The credit markets are telling me that this is not a buy and hold opportunity.



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Posted by BennyAndTheInkJets on 6/25 at 10:11 am to Blakely Bimbo
quote:

The action in TIPS is screaming D E F L A T I O N.

I wouldn't read it that way. The two big passive ETFs (Blackrock and Vanguard) have been getting outflows so are naturally sellers. Also some big funds that are leveraged up and own a lot of TIPS for correlation purposes have been selling TIPS to stay within their volatility ranges as TIPS vol spiked post Fed speeches and announcements. A lot of the TIPS sell-off is technical. I have no idea what the 10-year TIPS yields should be, but I don't think (strongly) it's positive 0.3% or whatever it is right now. I don't think they should be positive at all.



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Posted by Coeur du Tigre on 6/25 at 1:27 pm to BennyAndTheInkJets
These days it seems a lot of Keynes' market irrationality is due to leverage and program trading. You know the underlying economy is good, but will we see that represented in the markets?


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Posted by ItNeverRains on 6/25 at 3:17 pm to Coeur du Tigre
The Bernacks needs to come out and give a clearer timeline of what it is he anticipates doing at this point IMO. Not saying he needs to set precise dates, but he basically said nothing that we didn't know and market just went haywire do to same message of what his broad intentions are.the closer we get, the more panic will occur with these overly broad assessments


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Posted by BennyAndTheInkJets on 6/25 at 4:40 pm to Coeur du Tigre
quote:

These days it seems a lot of Keynes' market irrationality is due to leverage and program trading. You know the underlying economy is good, but will we see that represented in the markets?

I agree with a lot of this. Not necessarily in full agreement on the economy portion, I actually don't look at the markets for indicators on the economy. I look at the market for expectations, and if you need to know anything about expectations versus reality go look at the SECr predictions then what actually happens.

The point on leverage and program trading really is a sticking point to me. Investors felt the loving hand of the Fed and levered up big time, then when the Fed acts like they're pulling allowance when the market turns 18 they want to bitch about it. Program traders don't cause these massive swings outside of a few episodes that Nanex will pick up on. Leverage changed this from a 20-30 basis point move in rates to a 50-70 basis point move in rates.



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Posted by BennyAndTheInkJets on 6/25 at 4:42 pm to ItNeverRains
quote:

The Bernacks needs to come out and give a clearer timeline of what it is he anticipates doing at this point IMO. Not saying he needs to set precise dates, but he basically said nothing that we didn't know and market just went haywire do to same message of what his broad intentions are.the closer we get, the more panic will occur with these overly broad assessments

I think he gave too firm of a timeline, or that's at least what the market interpreted. I think the Fed is fine right now, looking through the speeches from Fisher and Kocherlakota yesterday coupled with today's action, I don't see Ben coming out with calming speeches anytime soon.



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Posted by Coeur du Tigre on 6/26 at 4:45 am to BennyAndTheInkJets
quote:

I actually don't look at the markets for indicators on the economy. I look at the market for expectations...

Good point. It's always easy to confuse the two.

I just feel that the underlying economy is looking fairly good right now so expectations should be better. Certainly not causing the kind of swings we have seen the last three or four weeks, dropping the S&P 500 by 8%. But as my wife says, being wrong comes naturally to me, I never have to work at it too much.



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