Bears Capitulate as Treasuries Thwart Chart Watchers

Discussion in 'Financial Futures' started by ASusilovic, Dec 17, 2007.

  1. It was only last April when John Kosar, the president of Asbury Research, insisted that anyone with a pencil and ruler could prove the 25-year bull market in Treasury bonds was over.

    Kosar said then that the looming decline was so obvious even a five-year-old could see yields would climb for ``many years'' to come. He acknowledged in an interview last week that ``trends have changed'' since July, when subprime mortgage losses began to contaminate credit markets. Citing charts of 30- year bond futures, Kosar said from his office in Lake in the Hills, Illinois, that the government bond market ``did an about- face'' and is now ``pointing to lower'' yields.

    The yield on the 10-year U.S. note fell as low as 3.79 percent on Nov. 26 from a five-year high of 5.32 percent in June as investors sought the safety of government debt amid mounting losses on securities linked to borrowers with poor credit. Treasuries have returned 7.71 percent this year, the most since 2002, when they gained 11.6 percent, according to Merrill Lynch & Co. index data.

    The sudden rise in the cost of credit sparked by the subprime collapse forced technical analysts, who make market predictions based on historical price patterns, to change their expectations. The difference between the interest rate banks pay for three-month loans and government borrowing costs, called the TED spread, reached 2.21 percentage points on Dec. 11, the highest since Aug. 20. The last time the spread was this high this long was in the aftermath of the 1987 stock market crash.

    Perfect headline for a short entry...:D :D :D
  2. Lake in the Hills, Illinois? Damn, that's getting close to me. I guess Bloomberg couldn't find anybody in NYC for comment. You do realize this means bonds should rally up to 116/117 in the near-term. That would be a better place to get "short" than 113.
  3. Nazz,

    you really want to make me waiting for this 116 / 117 area ? In the meantime, what to do with the overhang of USD in my portfolios ? I thought of a X-Mas shopping tour in NYC...:p
  4. NYC? Go to a warm-weather locale instead!
  5. I heard mail is now to be forwarded to Van Down by the River, Illinois...
  6. Matt, would that be the Fox River? :D
  7. Nazz,

    what´s up today with T-Notes and 30 yr ? Hitting multi-week lows...Thought, we´re playing sort of recession scenario, or ?
  8. Reasons for the recent downmove?...........(1) Christmas sales may be higher than what people have been led to believe? (2) Year-end liquidation? (3) Flight-to-risk, (higher yields)? The first week of January ought to be bullish because of an influx of retirement fund buying. Look at the chart to get a better view. I'd really like it if some portfolio manager in Mayberry, North Carolina or Hooterville, Tennessee gave a bearish forecast in the next few days.
  9. It could be as simple as "too many people were piling into the bullish camp"...

    From Mark Hulbert's 11/30 Marketwatch article:
    "If contrarians continue to be right about the bond market, now is not a good time to buy bonds. The path of least resistance over the next several months will be for interest rates to rise and for bonds to fall."

    He based this conclusion upon a reading of bond timer sentiment.
  10. Very interesting chart, indeed ! Ha, ha, ha ! Mjam, preferred breakfast ! :p
    #10     Dec 27, 2007