Discussion in 'Financial Futures' started by nitro, Oct 13, 2005.

Where will ZN end up by YE?

  1. >5%

    12 vote(s)
  2. 4.75 - 5.0%

    10 vote(s)
  3. 4.50 - 4.75%

    13 vote(s)
  4. < 4.50 with an inverted YC

    8 vote(s)
  1. nitro


    Numbers just came out, bonds reacted by pushing the ten yield higher, and more HOUSE OF PAIN for SIFs.

    Where is the ten yield going to end up by year end?

  2. nitro


    We need more votes.

  3. plugger


    "House of Pain"? Hmmm.......
  4. nitro


    Well, if you come back a year from now and post on this thread about "house of pain", it will look funny too.

    Look at the timestamp on the post. Pull up a chart.

  5. nitro


    Thanks for all the votes.

    Here is my analysis. If you take into account inflation, we still have a negative interest rate environment. I think the FED realizes this and will stop at nothing to bring the economy back to a balanced state by continuing to raise interest rates very slowly the rest of this year. That means we end up on the short end at 4.25 with the real short term interest rates closing the gap with zero%, but still below it.

    The proof of this is clear and all you have to do is open your eyes. In spite of dismal consumer numbers, the market rallied the last couple of days. The only way that can happen is if earnings are strong and companies have pricing power and can continue to hire and offer higher wages, i.e, wage inflation fueled by strong earnings.

    Now, what this means to the long end is problematical. While the analysis above is probably what everyone believes, that doesn't necessarily translate to the long end in the form of higher long term interest rates (as the FED would have hoped.)

    In all my years of trading, NEVER FIGHT THE FED is the only golden rule in trading that has never failed. That means, that to me, this time is not different, and the ten will not invert, and if it does, it will probably cause the most massive rally in the ten seen in recent history.

    Therefore, I voted 4.75% to 5% on the ten, and in fact, accelerating higher short term interest rates will probably be the reality come 2nd quarter of next year (from a more aggressive FED,) with the ten gasping for air to keep up.

  6. Curious why would this be the only explanation? Short covering and bargain hunting would probably occur on any data simply due to the extended fall.

    Wouldn't markets also rally on weaker data (although consumer sentiment is notoriously unreliable) just because it would imply Fed would need to take another view besides all the inflation jaw-boning they've done lately?
  7. nitro


    No you are absolutely correct - it could have been any number of things that took the market up, including short covering and bargain hunting.

    All I can tell you is that it didn't feel like either one of those to me. What it might have been is mid month VWAP buying, but not because it is a "bargain" _just_ because the price is low - prices are only low in relation to earnings/book/PEG etc, imo. In other words I don't attribute the rise for technical reasons. Hence, I stand by my feel for the rise as stated above.

    With energy at $60 or below, IRs and earnings dominate the next two weeks.

  8. I think Greenspan now finally realized the danger posed by the housing market, and will push the short rate much higher than the market is expecting.
  9. nitro


    Sorry, but the word "now" imo is incorrect. He has always realized this.

  10. nitro


    Ok, so get this, on Monday on Bernanke's announcement as FED chief, the stock market rallies. Bonds don't do much.

    Now, yesterday, the bonds got creamed during the regular session, and last night got slammed again taking the stock market with it, ON THE SAME NEWS!? Was there really a day lag on when the bonds decide that Bernanke is bad for bonds?

    I tell you, even KNOWING what is going to happen doesn't mean shit sometimes.

    :confused: nitro :confused:
    #10     Oct 26, 2005