David Woo, global head of rates and currencies research at BofA Merrill Lynch, suggests the next “pain trade” is betting on Treasuries. On the other hand, Woo’s counterpart at Société Générale, global head of rates and FX strategy Vincent Chaigneau, says the next pain trade is betting against Treasuries. The […]

ISM’s October Chicago Purchasing Managers Index was released at 9:45 AM, and the number surged to 65.9 from last month’s 55.7 reading. Economists were expecting it to decline slightly to 55.0. The survey results suggest Midwest manufacturing is on fire, and gold and Treasuries are taking a hit on the […]

This week, China’s Xinhua news agency released a mysterious “op-ed” calling on the world to “de-Americanize.” It was a lot of the usual talking points: the U.S. meddles too much in other countries’ affairs, it is guilty of moral hypocrisy — and the latest wrinkle, that the U.S. Government shutdown […]

If Congress is unable to produce a budget deal today, the U.S. will hit its October 17 debt ceiling, which is when the Treasury Department will no longer have the authority to borrow money by issuing Treasury securities like T-Bills, T-Notes, and T-Bonds. The stock market has been pretty sanguine […]

The U.S. Treasury bill market is back to pricing in heightened chances of an imminent default on short-term government obligations as negotiations in Washington, D.C. over ending the government shutdown and raising the debt ceiling break down. “It’s all fallen apart,” said Democratic Senator Dianne Feinstein, causing gold to spike […]

The most closely watched market all week has been the Treasury bill market. Yields on 1-month Treasury bills have been soaring as market participants priced in greater and greater chances of a default on these bills resulting from inability in Congress to agree on raising the debt ceiling, which the […]

"Better than a trillion dollar coin."

Treasury bills are getting hit hard today as the debt ceiling deadline approaches with little signs of an agreement in Congress to raise it. The chart below shows how the yield on the 1-month T-bill maturing October 31 — which traders are referring to as “Halloween bills” — is blowing […]

The monthly nonfarm payrolls report put out by the U.S. Bureau of Labour Statistics is perhaps the single most important report in determining the Federal Reserve’s outlook for monetary policy at the moment. The fact that it moves markets the most of any regular economic data release reflects this. However, […]

The battle over the debt ceiling in Congress raises a few questions. For instance: what if the debt ceiling isn’t raised in a timely manner, and the U.S. defaults on its debt for political reasons? Pursuant to that, who should be most concerned in such an event? Bilal Hafeez, Deutsche […]

Yesterday, we pointed out that the front end of the Treasury bill yield curve was blowing out, resulting in an inverted curve. The rise in yields on shorter-dated T-bills (specifically, those bills maturing between October 17 and October 31) relative to those on longer-dated bills suggests that the market is […]

In the wake of the ADP private-sector payroll creation release at 8:30 AM, S&P 500 futures are sinking and bonds are surging. ADP’s report estimated that 166,000 private-sector payrolls were created in September — below consensus estimates for 180,000, and August’s 176,000 reading was revised down to 159,000. S&P 500 […]

Yields on U.S. Treasury bills maturing October 17, October 24, and October 31 are blowing out today. The chart below shows the T-bill curve. The green line shows the curve on September 3, when yields on bills maturing October 17 to October 31 were much flatter. The red line shows […]

Matthew Hornbach, Morgan Stanley’s top interest rate strategist, sent a very clear message in his latest research note, which is titled: “Read My Lips: Buy Bonds.” “Fading the Treasury market rally would not be prudent, at this juncture, given risks to the economic outlook in the coming weeks,” wrote Hornbach […]

Stifel Nicolaus head of ETF trading and Strategy Dave Lutz passes along some commentary from Citi on the looming debt ceiling, and how fears over the political gridlock in Washington are starting to seep into fixed income markets. Yesterday, Citi analysts wrote that “some investors are beginning to avoid maturities […]

Budget battles in Washington and a potential Yellen Fed chair nomination, among other things.

Goldman wanted some three-month bills.

U.S. Treasuries have been on a slow grind lower for most of the morning, but the selling has really started to accelerate on heavy volume in the last few minutes. Right now, 10-year Treasury futrues are down 0.3%. The yield on the 10-year note is at 2.89%, 5 basis points […]

Rate locks unwinding.

According to the Treasury Department’s popular Treasury International Capital System (TICS)report, official foreign holdings of Treasury securities fell to $US4.009 trillion in June from $US4.072 trillion in May. So it would seem that the world’s central banks are exiting U.S. securities. “There are, however, many problems with such an interpretation, […]

Taper less likely?

The release of the minutes from the Federal Reserve’s July FOMC meeting yesterday sparked a sharp sell-off in the U.S. Treasury market. The selling continued overnight in Asian trading, and early this morning, the yield on the 10-year Treasury note rose to another new multi-year high of 2.94%. Since then, […]

Huge percentage change.

10-year yield hits new multi-year highs.

Biggest short position all year.

The yield on the 10-year Treasury note hits fresh two-year highs.

One of the biggest fears in the financial markets is that foreign investors will stop buying U.S. Treasury securities, causing borrowing rates to surge. Not that this is the beginning of a frightening trend, but new data from the Treasury Department shows that foreigners were net sellers in June. In […]

BofA warns that volatility is set to rise again.

Demand.

At the Delivering Alpha conference. 

It's also very different.

The bond god is a bond bull.

Will there be another tail?

Remember Bernanke on Wednesday?

Analysts still digesting today's big events.

Fed chairman basically saying "please proceed."

Fed sees better economic data.

"I think what we're looking at is a bond market rally that is going to start fairly quickly."

Selling off.

A different path.

Will we see a tail?

The history of the U.S. economy in one chart.

Either that, or they are encouraging the sell-off.

U.S. rates vol.

Record outflows.

The tapir is coming.

Risk off! But not quite.

Do you think the selling in the Treasury complex is over—at least until Friday’s NFP?

They might actually be a good sign for stocks.

Four big indicators.

Bloodshed coming.

Pushing yields back to the highs.

We typically avoid these types of calls, but we're making an exception.

All that aggressive monetary policy.

The "shooting star" may be coming to the Treasury market.

Make this your desktop wallpaper.

A rare bullish consensus.

Interest rates are where they should be.

The latest BofA Merrill Lynch survey of fixed income fund managers asks a simple question: Why are you long U.S. Treasury bonds?

[credit provider=”Bloomberg TV” url=”http://www.bloomberg.com/video/what-will-the-fed-policy-be-for-2013-VqNfiQvoT42Wq~JB3n3LkA.html”] Société Générale FX strategist Sebastien Galy thinks the second half of 2013 will be very interesting for markets.In a note titled “Asset rotation or something more sinister? Pre-Lehman vs now,” Galy writes that once the market is able to anticipate a Fed tightening, which he thinks […]

Big milestone for the selloff in US debt.

[credit provider=”Susanne Miller/USFWS via Flickr” url=”http://www.flickr.com/photos/usfwsendsp/5038885231/in/photostream/”] Interesting note from Nomura’s George Goncalves this morning, who notes a bear “pile-on” in the US Treasury market. Current market positioning for bonds has turned to an overall bearish bias as four out of the six key investor types we track had bearish flows in […]

We’ve been seeing analysts increasingly talk about a “1994”-style situation playing out in the market.

One of the clearest signs yet that debt ceiling fears have faded from the market is the recent shift in the yield curve for short-term U.S. Treasury bills.

[credit provider=”BGR” url=”http://bgr.com/2012/06/28/national-weather-service-alerts-smartphones/”] Morgan Stanley interest rate strategist Anton Heese’s latest note to clients comes with an ominous warning in its title: “There’s a Storm Coming.”Heese is referring to the market for Treasury Inflation Protected Securities, or TIPS. This class of government bonds – inflation-linked securities – was a clear outperformer […]

[credit provider=”flickr / son_gismo” url=”http://www.flickr.com/photos/[email protected]/3196511155/”] Heads up – the U.S. Treasury is auctioning off $13 billion in 30-year bonds this afternoon, and it could get interesting.This week, other government auctions for shorter-dated Treasuries finished with a very small “tail.”

UBS’s Maury Harris, who is frequently recognised as the most accurate economist on Wall Street, shared an important chart with Business Insider when we had lunch with him last week.

If one reads sellside research (especially that of Bank of America or Goldman), if one listens to comedy-finance fusion TV channels, or if one reads newspapers, one can’t help but be left with the impression that everyone and their grandmother is now dumping Treasuries and buying stocks.

“Since 1980, the Treasury market has posted a calendar year negative total return on three occasions,” writes Matthew Hornbach, Morgan Stanley’s top interest rate strategist. “Only three. In over 30 years.”

One thing I constantly hear is “interest rates only have one direction to go – UP!”  There’s this myth that t-bond yields and interest rates in general just have to go higher.  But history does not prove this at all.  In fact, history tells quite a different story. 

[credit provider=”Bloomberg TV” url=”http://www.bloomberg.com/video/aneta-markowska-doreen-mogavero-roundtable-I2vzVGH~ScOKJNUe0mpYEw.html”] By now, “fiscal cliff” should be a familiar term. The concept has inspired spin-offs like the “monetary cliff” and the “deposit insurance cliff,” among others.Now, Societe Generale economist Aneta Markowska is warning of another cliff – the dangers of which constitute a 75 per cent drop in […]

Below is an excellent chart from Goldman Asset Management. It shows the risk/return profile of holding the 10y treasury during different periods of time. “Principal” is the mark-to-market impact of the bond yield increasing by 100bp (1%). “Roll” is the impact of time passage. In one year the 10y bond […]

I keeping seeing articles and headlines in various places about how China is revolting against US paper in various ways.  These headlines either say that China is selling off US T-bond holdings or on the verge of rejecting US dollars.  This makes for great headlines and generates lots of page […]

China is poised to lose its place as the U.S.’s biggest creditor for the first time since the height of the financial crisis, blunting one of Mitt Romney’s favoured attacks in the presidential campaign.

There are few subjects that inspire more confusion in economics than Asian ownership of US debt.

[credit provider=”flickr / BurningQuestion” url=”http://www.flickr.com/photos/team_716_pwns/2686071229/”] BofA analysts Priya Misra and Brian Smedley have issued a warning in a recent note to clients about another “cliff” facing markets at the end of the year: the “$1.6 trillion deposit cliff” the U.S. banking system faces when special FDIC insurance provisions expire on […]

In a recent piece Paul Krugman highlighted this quote from Mitt Romney (via Kevin Drum) in which he expressed his concern over an impending failed government bond auction.  He said:

Earlier this month the Wall Street Journal posted the results of its August Survey of economists conducted August 3-6 (xls file). Let’s take another look at their estimates for 10-year yields. The various Federal Reserve strategies in recent years (ZIRP, QE1, QE2 and Operation Twist) have focused on lowering interest […]

[credit provider=”Stephen Chernin / Getty Images” url=”http://www.gettyimages.com/detail/news-photo/treasury-secretary-john-snow-views-a-computer-screen-as-tom-news-photo/3010258#”] Amid the ultra-low volatility in the stock markets, Treasury yields have quietly been on the rise.Some have attributed the move to the Federal Reserve not announcing more bond-buying through quantitative easing.

The story in the market is the back-up in US interest rates, a stealthy, but significant move that took a lot of folks by surprise over the last few weeks.

The sell-off in Treasury bonds has sent yields racing higher over the past few weeks, and no one really seems to be sure of exactly what is driving the move.

[credit provider=”CNBC”] On CNBC today, PIMCO’s Bill Gross doubled-down on a tweet from earlier about how Paul Ryan’s selection could explain the recent Treasury selloff.He explained to CNBC:

The market appears to be super-snoozy. But that’s just if you’re looking at stocks.

A rare occurrence in the U.S. government bond market last week could be signaling a big upward move in yields is on the way.

Aug. 11 (Bloomberg) — Treasuries fell, pushing the 10-year note yield to the highest since May, as economic data showed strength, dimming prospects for added monetary stimulus and limiting demand for $72 billion of U.S. debt sold at auctions.

[credit provider=”CDNBusinessMag via YouTube” url=”http://www.youtube.com/watch?v=N1J-NwdJe3k&feature=related”] Most bears on the the economy and the financial markets share the same outlooks.For example, many point to the U.S. government’s mounting debt load and argue that U.S. interest rates are bound to surge. In fact, we can think of 21 people who have argued […]

On 5 August 2011, Standard & Poor’s downgraded the credit rating of the United States.  The credit rating downgrade of the US triggered a global market sell-off, and the downgrade seemed to be a catalyst for the escalation of the Euro Crisis.

[credit provider=”Wikimedia Commons” url=”http://commons.wikimedia.org/wiki/File:Federal_Open_Market_Committee_Meeting.jpg”] The Fed has some tools left in its arsenal. Some of them are extremely unlikely, but considering them is especially interesting.BofA Merrill Lynch analyst Shyams Rajan recently wrote a report on all of the Fed’s remaining options.

Economists Scott Baker, Nicholas Bloom, and Steven Davis built the economic policy uncertainty index. Inputs to the model include “frequency of news media references to economic policy uncertainty, the number of federal tax code provisions set to expire in future years, and the extent of forecaster disagreement over future inflation and federal government […]

[credit provider=”Bloomberg” url=”http://www.bloomberg.com/quote/USGG10YR:IND/chart”] A commonly stated remark over the past 10 years has been “rates have nowhere to go but up.”Of course, this has been wildly incorrect every time it’s been said.

US Treasury rates are at the lowest in history.  Currently, the 10-year yield is at 1.40% and the 30-year yield is at 2.46%.

[credit provider=”Library of Congress” url=”http://www.loc.gov/pictures/resource/cph.3g09459/”] The rate at which the U.S. government pays to borrow hit its lowest level ever at multiple maturities, after the Treasury auctioned $35 billion in two-year notes.Those notes yielded a record low of 0.220 per cent, and the auction saw a bid-to-cover ratio of 4.0, […]

Hoisington Investment Management recently released its latest quarterly letter, penned by president Van Hoisington and economist Lacy Hunt.

[credit provider=”Wikimedia Commons” url=”http://commons.wikimedia.org/wiki/File:Madrid_may_day375.jpg”] JP Morgan equity strategists Mislav Matejka and Emmanuel are seeing “red flags” in the stock market right now.In a note to clients entitled, “Reality Check – many red flags emerging,” the strategists give seven reasons why a market rally might not be sustainable:

The trading week has started and it’s risk off.  Markets in Asia and Europe are getting slammed on renewed fears that Greece and Spain may not meet its debt obligations.

Via SocGen, here is how stocks, bonds, and three major currency pairs have traded on the days that Federal Reserve chairman Ben Bernanke has delivered his semi-annual testimony to Congress, going back to 2007:

Earlier this week I asked Societe Generale’s Dylan Grice which chart he watches for part a larger feature Business Insider ran titled The Most Important Charts In The World.

[credit provider=”William Thomas Cain/Getty Images” url=”http://abcnews.go.com/blogs/business/2011/11/irs-seeks-99123-taxpayers-for-unclaimed-money/”] This year, investors have been gobbling up US treasuries in a desperate effort to search for safety. But would they have done better to grab Australian sovereign debt or Singaporean bank bonds, as a shield against political incompetence in a fractious world?If the wealth management arm […]

SocGen investment strategist Dylan Grice does not think “safe-haven” assets are very safe.

Fortune Magazine’s Katherine Eban has a big report out this morning arguing the the Bureau of Alcohol, Tobacco, and Firearms (ATF) had nothing to do with letting guns into Mexico.