Uh-oh, big bond market dislocation today

[bills_fan]

Boom.

 

http://market-ticker.denninger.net/archive...-ALL-OF-IT.html

 

And just when rates are jumping, we head into this disaster.

 

Time to get short.

[IDBillzFan]

QUICK! SOMEBODY PRINT MORE MONEY!!!

[AlaskaDarin_Has_AIDS]

Ya "Change" hahahahahahahaha!

[KD in CA]

What? Bond Market? What about American Idol and gay marriage?

 

 

Scary stuff. That other shoe might be a big one.

[Fastback]

But consumer confidence is surging!

 

Seriously though...this is really bad news. While it is only one day, who knows where we go from here.

[bills_fan]

Scary stuff. That other shoe might be a big one.

 

 

Yep. But, ultimately I think Bernanke will back off, stop the QE and allow the rates to rise (thereby ensuring the US can actually sell gov't debt to investors) rather than print cash, buy every bid in the whole issue and become Zimbabwe and unable to fund the government. Yes, it will be Depression II (in the 1930s the Fed raised interest rates, choking off all growth), but it is better than the alternative.

 

The next FOMC meeting will be fascinating.

[Fastback]

Don't worry! Obama is on it and he has a 'plan'.

[TPS]

Yep. But, ultimately I think Bernanke will back off, stop the QE and allow the rates to rise (thereby ensuring the US can actually sell gov't debt to investors) rather than print cash, buy every bid in the whole issue and become Zimbabwe and unable to fund the government. Yes, it will be Depression II (in the 1930s the Fed raised interest rates, choking off all growth), but it is better than the alternative.

 

The next FOMC meeting will be fascinating.

Ultimately B will back off but not until he's sure there's a recovery. And, as I"m sure you know, they have discussed their "plan" to pull liquidity from the system once they are sure.

 

Most of the Feds actions have been to essentially swap reserves for (bad) assets. The Fed's Treasury holdings have only increased by $80 bil over the past year. The Treasury hasn't had much difficulty funding its needs because no one wants to be holding anything else but so-called "risk-free assets." That will of course change at some point.

 

As for "printing cash," most of what the Fed has "created" is being held as excess reserves by the banking system--elctronic chits. Inflation won't happen unless the Fed starts handing cash to you and me, or speculators start pushing up the price of commodity futures again...

[bills_fan]

Interesting commentary on yesterday's bond market mess and what it meant for home mortgages.

 

http://www.fieldcheckgroup.com/2009/05/28/...mortgage-rates/

[stuckincincy]

Boom.

 

http://market-ticker.denninger.net/archive...-ALL-OF-IT.html

 

And just when rates are jumping, we head into this disaster.

 

Time to get short.

 

Want to buy my silver holdings? Not mine interests...the real stuff.

 

[Magox]

Yep. But, ultimately I think Bernanke will back off, stop the QE and allow the rates to rise (thereby ensuring the US can actually sell gov't debt to investors) rather than print cash, buy every bid in the whole issue and become Zimbabwe and unable to fund the government. Yes, it will be Depression II (in the 1930s the Fed raised interest rates, choking off all growth), but it is better than the alternative.

 

The next FOMC meeting will be fascinating.

Yes, he will have to. But not now! They will wait to see a definitive recovery of the housing markets before they even think about doing it.

 

The next systemic risk that this economy will face will have to do with the Deficit, US Bond markets and dollar.

 

He's the ultimate keynesian.

There is no doubt in my mind that he believes he was destined for this role. He once said, in one of his speeches, in 2002 that

''the U.S. government has a technology, called a printing press, that allows it to produce as many dollars as it wishes at essentially no cost. Under a paper-money system, a determined government can always generate higher spending and, hence, positive inflation.''

 

 

 

There are too many downside risks for him to slam on the breaks right now.

 

My guess is that QE will continue for at least another 6-12 months.

 

As the economy shows signs of recovering, investors will dump treasuries and this will force the Fed to purchase more treasuries for a while longer. My guess is that they will purchase at least another trillion dollars worth of bonds and securities with the possibility of that number being substantially higher before it's all said and done.

[bills_fan]

Yes, he will have to. But not now! They will wait to see a definitive recovery of the housing markets before they even think about doing it.

 

The next systemic risk that this economy will face will have to do with the Deficit, US Bond markets and dollar.

 

He's the ultimate keynesian.

There is no doubt in my mind that he believes he was destined for this role. He once said, in one of his speeches, in 2002 that

''the U.S. government has a technology, called a printing press, that allows it to produce as many dollars as it wishes at essentially no cost. Under a paper-money system, a determined government can always generate higher spending and, hence, positive inflation.''

 

 

 

There are too many downside risks for him to slam on the breaks right now.

 

My guess is that QE will continue for at least another 6-12 months.

 

As the economy shows signs of recovering, investors will dump treasuries and this will force the Fed to purchase more treasuries for a while longer. My guess is that they will purchase at least another trillion dollars worth of bonds and securities with the possibility of that number being substantially higher before it's all said and done.

 

 

Problem is, the more he uses QE, the more foreign countries and other bondholders are tendering into his price. The amount keeps getting bigger. BB says...I will buy at x price, others say OK...here you go. He can't buy it all.

[Magox]

Problem is, the more he uses QE, the more foreign countries and other bondholders are tendering into his price. The amount keeps getting bigger. BB says...I will buy at x price, others say OK...here you go. He can't buy it all.

I think that is the one of the main dilemna's that the fed is now encountering. I read a report today that they are "studying" the recent bond movements.

 

Not to toot my own horn, but I've told my clients this at least a hundred times in the last few months, before there these recent bond movements that this would be a very expensive proposition for the fed. I even wrote about this exact same thing in an earlier thread in the OFFTOPIC section that as the Fed purchases these treasuries, and investors anticipate higher inflation and go out to seek higher returns on their money that they would be dumping their treasuries forcing rates to go higher which in turn would cause the Fed to have to purchase even more to attempt to maintain lower rates.

 

They are going to have to rethink their strategies, my guess is that they will continue QE, (to tell you the truth, I think they want a weaker dollar because in their thinking it will help exports and pay down the deficit) go over to China and lie to them and tell them that we have a "strong dollar" policy and hope for the best.

[Fastback]

Well if the sheeple are too stupid to do anything to stop the reckless spending, maybe the Masters of the Universe will do it for us.

 

http://apnews.myway.com/article/20090606/D98L67500.html

 

We might have to burn the village to save it.

[IDBillzFan]

Well if the sheeple are too stupid to do anything to stop the reckless spending, maybe the Masters of the Universe will do it for us.

 

http://apnews.myway.com/article/20090606/D98L67500.html

 

We might have to burn the village to save it.

Part of the problem is that too many of the sheeple do not see the spending as reckless. They see it as the only real way to stop the recession.

[Magox]

Part of the problem is that too many of the sheeple do not see the spending as reckless. They see it as the only real way to stop the recession.

The day the Fed's decided to monetize our debt, on the 18th of March, I predicted that this would happen. I even started a thread about it on the Offtopic section. http://www.stadiumwall.com/index.php?showt...85413&st=20

 

I said that in the short term rates would go down, and that shortly afterwards we would be seeing higher rates due to investors dumping treasuries because of the obvious inflationary consequences.

 

This is really going to make life much more difficult for the Fed, because if they decide to buy more debt to lower rates, it could have a severe impact on the dollar, and if they don't rates will continue to rise and then you will most likely see another dip in the housing market.

 

They are damned if they do and damned if they don't. The Fed entered into a whole new dangerous ball game and now my guess is that they have no choice but to continue to keep buying more debt, which I'm still opposed to, but since this is the path that they have chosen, they will most likely continue their wreckless actions; And I can tell you, that once again it will most likely have a short term impact on rates, then we will see rates go back higher again. The Bond investors are too smart for that.

 

Even Angela Merkel the other day criticized the Fed for printing too much money, and it is rare to see some one of her position to criticize the Fed's action. Good for her

 

If I saw this coming, why couldn't the Fed of predicted this?

[Magox]

This is the Fed's conundrum!

 

http://www.bloomberg.com/apps/news?pid=206...id=aZb6bu33Whng

 

here's a snippet:

 

U.S. mortgage applications fell last week to the lowest level since February as a jump in borrowing costs discouraged refinancing and signaled that Federal Reserve Chairman Ben S. Bernanke’s efforts to cap rates is stalling.