The financial media spin on the Fed moving from an "accomodative" to "neutral" stance has been beneficial for stocks and bonds but bonds don't have anything else in their favor and have failed to take full advantage of the favorable conditions that were created for their advance.
Although I think Friday was a good time to liquidate a long position, a good time to open a short position would probably be later in a couple of weeks, sometime during the first week of January â06: Jan 3rd (FOMC minutes) or Jan 6th (employment report).
Besides prices having not acted favourably to the conditions presented them, is there any other fundamental reason you see to short bonds? Do you see the fed overdoing itself?
Hi Surdo, how far in would you be willing to scale in before you change your mind? I personally added to a position I already held, but am wary of the light volume and the beginning of the new year right around the corner thanks
The medium to long term trend is negative because the Fed's so called neutral stance doesn't necessarily mean that interest rate hikes will soon be over. In the past 35 years, the Fed has always waited for capacity utilization to go down to either start lowering interest rates or to just keep them steady: http://www.dallasfed.org/data/data/mub00004.htm http://www.dallasfed.org/data/data/rmfedfun.htm I also consider the recent drop in oil prices to be just a dip before returning to $60-61 in a week or two.
I will scale and chop if I have to from 114 1/2 - 116. We could trade to 4.3 on the TNX and 4.5 on the TYX. I am not going to be too big just yet.
Wow, deep pokets, that's a pretty wide range... Topside of your range is where I think I will prob get out... thanks
Defintiely agree on the capacity question, the economy in general remains strong... But from standpoint in long rates, which are more sensitive to inflation and less to the fed, I have reversed my opinion on where I think pricing pressures are post-Katrina... I think we agree on one thing though, they're definitely going two more, to 4.75, and not the truly optimistic 4.5 as some would like it. However, I think the street has mostly priced in a 4.75 FF, and yet we are still hovering at 4.5 in the ten year, which is my justification for continuing to push long... The most memorable quote I"ve heard in the last two months is "If we go inverted, chances are we will go VERY inverted" meaning I don't think there will be much of a bounce, the lack of a true rally in the last two months has already been resistence from inversion, if we get a sign that it's ok, let the flood gates open.