Does ZeroHedge understand the Treasury market? According to the most thorough and well known bond market blog—John Jansen’s Across the Curve—Zero Hedge’s reporting “is just egregiously incorrect and demonstrates the collective lack of knowledge of the various authors.”
Without a doubt, the rise of the pseudonymous blogging-collective known as Zero Hedge has been one of the great underground stories of online financial journalism. Rising from an unknown blog last spring, Zero Hedge has been regularly cited in mainstream publications such as Barron’s, has inspired investment banks to lash out with rebuttals to its charges and arguably helped focus journalists, lawmakers, and regulators on the issue of high-frequency trading.
So the question of Zero Hedge’s understanding of the bond market is important, especially since it has been highly critical of the Federal Reserve. Basically, Zero Hedge has accused the Fed of manipulating markets.
Today John Jansen argues that Zero Hedge misread the most recent 10-year Treasury auction. The dispute concerns the “expected stop-out” of the auction, which is highest yield at which market participants expect the Treasuries will sell. Zero Hedge read the most recent auction as blowing out the expectations, coming in at a yield of 3.51% versus an expectation of 3.35%. This would imply that the Fed’s attempt to continue a program of quantitative easing would be in trouble.
Jansen says the expected stop-out was nowhere near that low. The bonds had not traded that low since Friday, before the labour report which showed joblessness at 26 year highs but new jobless claims falling to the lowest levels all year. The 10 year notes were trading much closer to the stop than Zero Hedge reports, Jansen argues.
“One must logically conclude that when they make such a fundamental factual error as they did today that they should not be trusted when making grandiose charges about the conduct of monetary policy,” Jansen writes.
Of course, it’s always possible that this is just a typographical tempest in a teapot. Maybe Zero Hedge just misread a 3.53% expected stop out as 3.35%.
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