Please, click here to read this article in pdf format: august-19-2009 If you read most daily comments from yesterday, you will leave with the impression that nothing really substantial has taken place lately, perhaps on grounds that that trading was on slim volume. When some sort of fundamental analysis is proposed, it is also on [...]
Please, click here to read this article in pdf format: august-19-2009
If you read most daily comments from yesterday, you will leave with the impression that nothing really substantial has taken place lately, perhaps on grounds that that trading was on slim volume. When some sort of fundamental analysis is proposed, it is also on the basis of the latest macro data releases (i.e. Producer Price Index, Housing, etc.) only.
However, something happened early this morning that I thought was rather strange. As soon as I started watching my usual charts I found that the EUR/JPY cross and the CAD were plunging, together with oil, as the 30-yr Treasury bond was in full force approaching the $103 level. With these figures, it was clear to me that stocks were to sell off yesterday, and I could not understand how Asia’s and Europe’s equity indexes were recovering. Below, I show the 30-yr Treasury intraday and the S&P500 (source: Bloomberg):
I was totally lost, until I came across a morning research note recommending selling 2-yr Agency debt (i.e. a security issued by US government sponsored agency, like Fannie Mae). I read the analysis and the recommendation made a lot of sense. Only then, did I put the two and two together: On Monday, as I discussed here, the “rumor” went out that China would buy mortgages. Why would China, owner of Treasuries, change these for mortgages that are so expensive? And then again, I realized that the latest sell-off we saw in stocks started in Asia…Now, I believed in conspiracy theories again!
If my intuition was right, we should have seen the spread between 2-yr Agencies and Treasuries react to this by widening, as 2-yr Agency debt was being swapped for Treasuries (i.e. investors sell Agencies = Agency spreads widen, and buy Treasuries = Treasury spreads tighten). Thus, I looked for the magic chart, and this is what I found (source: Bloomberg):
As you can see, this trade has been significant in the last two sessions and…it starts early, with Monday’s activity developing overnight in Asia. This has two immediate and very strong implications, as well as ramifications: (1) as this swap takes place within fixed income assets, we can perfectly see both Treasuries AND stocks rally, which is counterintuitive. The proof is in the 3-mo Libor-OIS spread that continued to collapse, reaching 23.85bps yesterday. In the process, if this comes from overseas, we can see volatility in the FX markets (i.e. EUR/JPY) and (2) this swap suggests to me interest rates may remain low longer than what you or I would think. If this is correct, jump-to-default risk can further fall and drag credit even tighter!
February 10th, 2012 at 2:22 PM
Superb website…
[...]always a big fan of linking to bloggers that I love but don’t get a lot of link love from[...]……
February 10th, 2012 at 2:43 PM
Awesome website…
[...]the time to read or visit the content or sites we have linked to below the[...]……
February 10th, 2012 at 4:43 PM
Related……
[...]just beneath, are numerous totally not related sites to ours, however, they are surely worth going over[...]……
February 10th, 2012 at 5:28 PM
Gems form the internet…
[...]very few websites that happen to be detailed below, from our point of view are undoubtedly well worth checking out[...]……
February 10th, 2012 at 6:21 PM
You should check this out…
[...] Wonderful story, reckoned we could combine a few unrelated data, nevertheless really worth taking a look, whoa did one learn about Mid East has got more problerms as well [...]……
February 10th, 2012 at 6:58 PM
Sites we Like……
[...] Every once in a while we choose blogs that we read. Listed below are the latest sites that we choose [...]……
February 11th, 2012 at 10:50 AM
Visitor recommendations…
[...]one of our visitors recently recommended the following website[...]……
February 11th, 2012 at 11:55 AM
Sites we Like……
[...] Every once in a while we choose blogs that we read. Listed below are the latest sites that we choose [...]……
February 11th, 2012 at 12:53 PM
Visitor recommendations…
[...]one of our visitors recently recommended the following website[...]……
February 11th, 2012 at 4:26 PM
Recommeneded websites…
[...]Here are some of the sites we recommend for our visitors[...]……
February 11th, 2012 at 4:29 PM
Gems form the internet…
[...]very few websites that happen to be detailed below, from our point of view are undoubtedly well worth checking out[...]……
February 11th, 2012 at 5:53 PM
Related……
[...]just beneath, are numerous totally not related sites to ours, however, they are surely worth going over[...]……
February 11th, 2012 at 7:59 PM
Read was interesting, stay in touch……
[...]please visit the sites we follow, including this one, as it represents our picks from the web[...]……
February 11th, 2012 at 8:58 PM
Check this out…
[...] that is the end of this article. Here you’ll find some sites that we think you’ll appreciate, just click the links over[...]……
February 11th, 2012 at 11:12 PM
Great website…
[...]we like to honor many other internet sites on the web, even if they aren’t linked to us, by linking to them. Under are some webpages worth checking out[...]……
February 12th, 2012 at 11:01 AM
Sources…
[...]check below, are some totally unrelated websites to ours, however, they are most trustworthy sources that we use[...]……
February 12th, 2012 at 11:40 AM
Related……
[...]just beneath, are numerous totally not related sites to ours, however, they are surely worth going over[...]……
February 12th, 2012 at 11:58 AM
Cool sites…
[...]we came across a cool site that you might enjoy. Take a look if you want[...]……
February 12th, 2012 at 1:30 PM
Cool sites…
[...]we came across a cool site that you might enjoy. Take a look if you want[...]……
February 12th, 2012 at 2:08 PM
Recent Blogroll Additions……
[...]usually posts some very interesting stuff like this. If you’re new to this site[...]……
February 12th, 2012 at 3:00 PM
Cool sites…
[...]we came across a cool site that you might enjoy. Take a look if you want[...]……
February 12th, 2012 at 3:48 PM
Sources…
[...]check below, are some totally unrelated websites to ours, however, they are most trustworthy sources that we use[...]……
February 12th, 2012 at 4:05 PM
Awesome website…
[...]the time to read or visit the content or sites we have linked to below the[...]……
February 12th, 2012 at 4:09 PM
Websites worth visiting…
[...]here are some links to sites that we link to because we think they are worth visiting[...]……
February 12th, 2012 at 5:27 PM
Online Article……
[...]The information mentioned in the article are some of the best available [...]……
February 12th, 2012 at 6:23 PM
Read was interesting, stay in touch……
[...]please visit the sites we follow, including this one, as it represents our picks from the web[...]……
February 12th, 2012 at 7:23 PM
Websites worth visiting…
[...]here are some links to sites that we link to because we think they are worth visiting[...]……
February 12th, 2012 at 8:18 PM
Read was interesting, stay in touch……
[...]please visit the sites we follow, including this one, as it represents our picks from the web[...]……
February 12th, 2012 at 8:39 PM
Awesome website…
[...]the time to read or visit the content or sites we have linked to below the[...]……
February 12th, 2012 at 9:17 PM
Sources…
[...]check below, are some totally unrelated websites to ours, however, they are most trustworthy sources that we use[...]……
February 12th, 2012 at 9:37 PM
Related……
[...]just beneath, are numerous totally not related sites to ours, however, they are surely worth going over[...]……
February 13th, 2012 at 4:07 AM
Gems form the internet…
[...]very few websites that happen to be detailed below, from our point of view are undoubtedly well worth checking out[...]……
February 13th, 2012 at 4:39 AM
Online Article……
[...]The information mentioned in the article are some of the best available [...]……
February 13th, 2012 at 5:25 AM
Websites we think you should visit…
[...]although websites we backlink to below are considerably not related to ours, we feel they are actually worth a go through, so have a look[...]……
February 13th, 2012 at 5:28 AM
Gems form the internet…
[...]very few websites that happen to be detailed below, from our point of view are undoubtedly well worth checking out[...]……
February 13th, 2012 at 7:25 AM
Recent Blogroll Additions……
[...]usually posts some very interesting stuff like this. If you’re new to this site[...]……
February 13th, 2012 at 7:44 AM
Links…
[...]Sites of interest we have a link to[...]……
February 13th, 2012 at 9:37 AM
Related……
[...]just beneath, are numerous totally not related sites to ours, however, they are surely worth going over[...]……
February 13th, 2012 at 11:10 AM
Read was interesting, stay in touch……
[...]please visit the sites we follow, including this one, as it represents our picks from the web[...]……
February 13th, 2012 at 11:16 AM
You should check this out…
[...] Wonderful story, reckoned we could combine a few unrelated data, nevertheless really worth taking a look, whoa did one learn about Mid East has got more problerms as well [...]……
February 13th, 2012 at 6:06 PM
Superb website…
[...]always a big fan of linking to bloggers that I love but don’t get a lot of link love from[...]……
February 14th, 2012 at 6:48 AM
Related……
[...]just beneath, are numerous totally not related sites to ours, however, they are surely worth going over[...]……
February 14th, 2012 at 10:50 AM
Visitor recommendations…
[...]one of our visitors recently recommended the following website[...]……
February 14th, 2012 at 11:03 AM
Recent Blogroll Additions……
[...]usually posts some very interesting stuff like this. If you’re new to this site[...]……
February 14th, 2012 at 6:03 PM
You should check this out…
[...] Wonderful story, reckoned we could combine a few unrelated data, nevertheless really worth taking a look, whoa did one learn about Mid East has got more problerms as well [...]……
February 15th, 2012 at 4:34 AM
Blogs ou should be reading…
[...]Here is a Great Blog You Might Find Interesting that we Encourage You[...]……
February 15th, 2012 at 8:27 AM
Awesome website…
[...]the time to read or visit the content or sites we have linked to below the[...]……
February 15th, 2012 at 10:05 AM
Cool sites…
[...]we came across a cool site that you might enjoy. Take a look if you want[...]……
February 15th, 2012 at 5:30 PM
Gems form the internet…
[...]very few websites that happen to be detailed below, from our point of view are undoubtedly well worth checking out[...]……
February 15th, 2012 at 7:52 PM
Online Article……
[...]The information mentioned in the article are some of the best available [...]……
February 15th, 2012 at 8:24 PM
Visitor recommendations…
[...]one of our visitors recently recommended the following website[...]……
February 15th, 2012 at 10:05 PM
Links…
[...]Sites of interest we have a link to[...]……
February 16th, 2012 at 12:14 AM
Tough Week…
It was a tough week here for the past week, so I just took to piddeling around on the internet and realized…
February 16th, 2012 at 4:28 AM
You should check this out…
[...] Wonderful story, reckoned we could combine a few unrelated data, nevertheless really worth taking a look, whoa did one learn about Mid East has got more problerms as well [...]……
February 16th, 2012 at 8:42 AM
Superb website…
[...]always a big fan of linking to bloggers that I love but don’t get a lot of link love from[...]……
February 16th, 2012 at 8:43 AM
Cool sites…
[...]we came across a cool site that you might enjoy. Take a look if you want[...]……
February 16th, 2012 at 10:44 AM
Check this out…
[...] that is the end of this article. Here you’ll find some sites that we think you’ll appreciate, just click the links over[...]……
February 17th, 2012 at 3:12 AM
Sites we Like……
[...] Every once in a while we choose blogs that we read. Listed below are the latest sites that we choose [...]……
February 17th, 2012 at 8:04 AM
Websites you should visit…
[...]below you’ll find the link to some sites that we think you should visit[...]……
February 17th, 2012 at 12:25 PM
Online Article……
[...]The information mentioned in the article are some of the best available [...]……
February 17th, 2012 at 1:41 PM
Great website…
[...]we like to honor many other internet sites on the web, even if they aren’t linked to us, by linking to them. Under are some webpages worth checking out[...]……
February 17th, 2012 at 3:31 PM
Websites worth visiting…
[...]here are some links to sites that we link to because we think they are worth visiting[...]……