Arguably the two most significant macroeconomic events taking place in markets currently are the drop in US Treasury yields to near historic lows and the breakdown of Chinese yuan below the "line in the sand" 7.0 level. Oddly enough, a similar thing happened back in...
The last six months has seen one of the most incredible changes in investor positioning in 10-year US treasury bonds in recent history. Back in early January, around the time rates peaked, non-commercial traders (AKA speculators) were net short 10-year options and futures contracts by...
Counter-cyclical stocks have underperformed cyclical stocks by about 9% since Brexit lows. That recent bout of underperformance has been enough to spur many to proclaim that the world is on the cusp of faster growth and the reach for yield play has seen its end. A review...
One of the biggest questions equity investors are facing right now is whether to stay defensive or to turn up the cyclical heat on any pullback. We've been writing on this very topic for the last few weeks here, here and here. Staying defensive is...
We first discussed the historic extreme in the spread between German Bunds and U.S. Treasuries last April (here). And that relationship has continued since, propelling the difference (in red, below) to levels well above those reached over the last two decades: (Germany in blue, U.S. in...
In a nutshell, we are absolutely amazed at the amount of pain endured by speculators who are short long-term treasury bonds....
On Tuesday, the spread between the US 10-year bond and the German 10-year bond reach 180 basis points (currently at 176 basis points). This was the widest spread since May 11, 1989....
Shorting long duration treasury bonds really is becoming the modern day widow maker, as we noted last August. Yet, despite all the pain endured since last August for anyone shorting treasuries, traders still maintain a historically large short position in futures and options on the...
The story of 2014, and so far in 2015, is that yields have continued to fall contrary to most economists’ expectations. This matters to equity investors because the appropriate asset allocation in a falling yield environment is much different than the best allocation in a...
Despite the powerful rally over the last several weeks that brought the US equity markets back to their all-time highs, treasury yields are up only slightly and are well below mid-September levels....
The bullish action in the treasury bond market continued today with the 10-year yield down another 9bps and the 30-year yield down another 6bps. Bond yields are at levels not seen since the commencing of the ”taper tantrum” in the middle of 2013....
As treasury yields plunge again today to new 1-year lows (the 10 and 30-year treasury bond yields are both down 3bps to 2.33% and 3.07%, respectively), we are reminded of a popular trade over the last decade to short Japanese government bonds, which has aptly...
Ending a 66-day streak of consecutive days without a 1% down finish, the S&P500 finally succumbed to statistics as it lost about 1.2% today. Bonds and gold, on the other hand, rallied as the US 10-year treasury yield lost 7bps, the 30-year lost 6bps, and...
The Fed is set to conclude its nearly six-year-old experiment with quantitative easing (QE) and the Federal Reserve Board has clearly laid out the most likely course for termination of the program....
The exudes seen in bond funds last year has shown persistent signs of reversal in 2014. Indeed, over the last four weeks about $12.4bn flowed into bond funds (blue line). Meanwhile, equity funds, which saw positive flows throughout most of 2013 and the first few...
