It's all about the BONDs

Discussion in 'Trading' started by truetraderone, Jun 8, 2007.


    Treasuries Extend Slide, Pushing Yields to Near Highest in Year

    By Agnes Lovasz and Kevin Lim

    June 8 (Bloomberg) -- U.S. Treasuries dropped, pushing 10- year yields to the highest in almost a year, on concern accelerating economic growth and inflation will encourage central banks to raise interest rates.

    The benchmark 10-year note extended declines after slumping yesterday by the most in more than three years. Debt markets in the U.S., Europe and Asia have been sliding since New Zealand unexpectedly raised borrowing costs yesterday, stoking concern other central banks will follow.

    ``It'd be dangerous to get in now,'' said Christian Zima, a fixed-income fund manager in Vienna at Raiffeisen KAG, which oversees the equivalent of $24 billion of bonds. ``The yield levels are starting to look attractive but sentiment is bad. There are further rate hikes getting priced in.''

    The yield on the 4 1/2 percent security due in May 2017 increased 8 basis points, or 0.08 percentage point, to 5.21 percent as of 10:54 a.m. in London, according to bond broker Cantor Fitzgerald LP. It breached 5 percent yesterday for the first time since August.

    The price fell 18/32, or $5.63 per $1,000 face amount, to 94 16/32. Zima said a yield of 5.25 percent may be a good level to start buying.

    The benchmark Treasuries are headed for the biggest weekly decline since March 2005 as traders scaled back bets for a cut in interest rates by the Federal Reserve this year. Ten-year yields are up 21 basis points on the week.

    ``There will be another selling wave,'' Kornelius Purps, a fixed-income strategist at Unicredit Markets and Investment Banking, said in Munich. ``Investors shouldn't try to catch the falling knife. They'll wait until it reaches the floor.''

    Fed Outlook

    Purps expects the 10-year yield to rise to between 5.25 percent and 5.30 percent next week.

    Traders now assign a 44 percent chance the Fed will raise rates by 25 basis points by December, compared zero percent a month ago, according to options on Fed funds futures.

    The Federal Reserve has kept its overnight lending rate between banks at 5.25 percent at its last seven meetings. Policy makers will next decide on interest rates on June 28.

    ``Investors are basically bailing out,'' said Felix Stephen, who helps manage $6.8 billion at Advance Asset Management in Sydney. ``People first thought interest rates were going down'' rather than up.

    New Zealand two-year government bonds fell for a sixth day after the country's central bank this week raised borrowing costs to a record high of 8 percent. German bunds also declined after the European Central Bank lifted its benchmark rate. Japanese and Australian government bonds dropped today.

    Stock Slide

    Bonds may be supported as stock markets in the U.S., Asia and Europe slumped on the expectations of higher rates, making yields on debt securities more attractive for some investors.

    European stocks fell for a fifth day, the longest rout in three months after a plunge in U.S. equities yesterday. Asian share markets dropped the most in seven weeks.

    ``High yields are making us more interested in bonds,'' said Michael Hughes, who helps manage $40 billion as chief investment officer at Baring Asset Management in London. ``Given the run in equities we've had, it's not surprising for a correction to happen.''

    The spread between two- and 10-year note yields widened to 17 basis points, from 10 points yesterday. The yield on the two- year security climbed 1 basis point today to 5.04 percent.

    ``The near-term setback in equities should support the short end of the curve,'' said Hidehiko Maejima, a bond strategist at BNP Paribas Securities Japan Ltd. in Tokyo, referring to bonds maturing in less than 10 years.

    To contact the reporter on this story: Agnes Lovasz in London at ;

    Last Updated: June 8, 2007 05:57 EDT
  2. When you post a link to an article you should at least make some sort of effort to offer commentary as to why it is important.
  3. I'll make this quick. No, the gentlemen posted pertinent information and commentary is optional.

    It appears the dogs are getting to you. Now you're lashing out at everyone.

    You might want to step back from this trading board and focus on why you're here in the first place. To create wealth and you seem to have a good grasp on strong stocks and longer time frames. That's a great start but you want to earn income and that's why you're here, correct?

    You won't learn anything at the rate you're going. That's my opinion. All the tools you need are at your disposal. Operate in a vacuum, if you will, and digest some of the journals. Alot of great info if you filter. Avoid the Cramers of the market, they'll poison your progress. Most importantly, study the market and know it intimately. Pick one instrument a few stocks or futures and watch them realtime everyday. Lower time frames with their charts tick minute hourly etc.. At night study their charts daily, weekly and monthly.

    After some time has passed it'll all come together.

    I hold great equities long(years sometimes) as long as they continue to grow. Divies are an additional revenue stream. Lower taxes is a consideration.

    I scale in (months/years) to strong companies with the Buffett moat idea. This is farming to me and this creates great wealth.

    Swing trade/intra daytrade depending on market conditions. This generates income today and beyond.

    This all takes capital and a way to start is to trade/invest the way you have been but to move slowly forward on your timeframes and continue educating yourself. Markets will always be there but you must be prepared before you join them.

    Good trading/investing to you,