Just want to get consensus here. 50bp on the 20 yr either way calculates to about 6% at these leaves.
Bond traders won't know what to do except to buy more bonds. This is a real paradigm shift. Uncle Ben will not allow yields to rise because that would stymie a economic recovery that was already on life support. I think bonds close up.
Maybe so, but long term, bond traders need money to buy more bonds. Where will it come from? Low rates were not a concern when there was no downside risk. But now it's even lower rates with some down side risk. If I'm getting 2.5% I want virtually no risk. The funny thing is, maybe instead of buying bonds I will just open a restaurant or buy an apartment building. If nothing is without risk anymore, at least I have a chance. And that's the kind of thinking that could turn things back around. In which case, bonds would go down.
And when I say risk, I'm not talking credit risk. I mean the risk that nobody wants to buy my lousy low paying bonds for more than I paid for them.
yeah, I'm confused. Did S&P downgrade our debt or our stock market? According to the girl on TV (who knows way more about make up and hairstyles than I ever will) the mkt went down because of the downgrade. So how come if I'm short bonds and long stocks I'm still losing money? If I sell bonds because they are downgraded, what am I gonna do with the money? I don't know, buy stocks?
For USTs a downgrade is a meaningless sideshow. For risky assets, such as equities, the mkt perceives the downgrade to be a very meaningful piece of news (or just a final straw, as the case may be). So sell them stocks and buy them bonds.
well Martin, you may be right, I just got tired of loaning the US Government my money since I wasn't getting much for it in return. I'll loan them money if you promise to pay me more than I paid for my bonds. If you want to buy anymore let me know, I want to sell and do something else with my money. Just what I haven't decided yet.