TMF and TLT (US Treasuries)

[chippermon]

Yeah,
Definitely 102 then 97.46. Should coincide with the 10 year 91'07'7 SPX 4567 or so

[Yodean]

@budge, @chip: nice calls on TLT.



*****

another sentiment indicator that USD interim top may be in, or close ...

[jlhooter]

@budge, @chip: nice calls on TLT.



*****

another sentiment indicator that USD interim top may be in, or close ...

So the dollar will hit tippy top on Oct 10?

[chippermon]

@budge, @chip: nice calls on TLT.



*****

another sentiment indicator that USD interim top may be in, or close ...

Yeah, I kind of underestimated the 10 year but it looks like it might find support around here. Then one more piece of the puzzle to come. I hope. I'm with you on the Greenback.

[Budge]

@budge, @chip: nice calls on TLT.



*****

another sentiment indicator that USD interim top may be in, or close ...

Yeah, I kind of underestimated the 10 year but it looks like it might find support around here. Then one more piece of the puzzle to come. I hope. I'm with you on the Greenback.

TLT is showing extremely oversold on monthly and weekly but it's not out of the woods yet. Not showing oversold on quarterly. It's at its 2012 low and may go for its 2010 low of $87.

Opposite story with the 10-year TNX. Headed higher after brief drop to mid Bollinger Band point. May take out that recent high at $39.92 and the 2010 high $40.13. Q, M, W ADX showing it going higher but M and W RSI showing overbought. Hmm.

[chippermon]

@budge, @chip: nice calls on TLT.



*****

another sentiment indicator that USD interim top may be in, or close ...

Yeah, I kind of underestimated the 10 year but it looks like it might find support around here. Then one more piece of the puzzle to come. I hope. I'm with you on the Greenback.

TLT is showing extremely oversold on monthly and weekly but it's not out of the woods yet. Not showing oversold on quarterly. It's at its 2012 low and may go for its 2010 low of $87.

Opposite story with the 10-year TNX. Headed higher after brief drop to mid Bollinger Band point. May take out that recent high at $39.92 and the 2010 high $40.13. Q, M, W ADX showing it going higher but M and W RSI showing overbought. Hmm.

Yeah, I see that. This is kind of a tough one.

[SOL]

Monthly chart of TLT



If you look at the second indicator, one that measures strength, one can see that whenever there was a positive divergence, there was a turnaround in TLT.

However, credit markets are freezing, bond market liquidity is drying, the housing market is pulling back, companies are scaling back on hiring, etc., so there is a chance of a soft pivot from the Fed. The barest hint of a minor pivot will set the bond market on fire.

If this comes to pass, we will use the rally to trim our position in TLT and TMF but only in anticipation of jumping back in at a lower price.

Despite the blood (and all of us at TI actively play the markets, so we are also in the same boat), the only silver lining is that we are in bullish funds. We would be done if we were shorting the markets and they had rallied to the same percentage that the markets have pulled back. In other words, pretend we had shorted the markets and the markets had rallied to the extent they have dropped now. You have a limited window to act if you are a bear, and then you will just keep getting hammered once the trend changes because bull markets last longer than bears. Look at the chart of SQQQ and TQQQ in the last update.

If you are bull, and even if you bought close to the top, there is a good chance that you will be in the black overall unless you invested all your capital in speculative plays. As we did not invest at the top, meaning we did not purchase our stocks when they were putting in new highs, the odds are even higher that we will recoup.

New notes

However, given the extreme way the press manipulates the data, Think of COVID and the War between Russia and Ukraine. Additionally, while the last indicator is trading in the extreme zone, it has not flashed a positive divergence, which it did on all previous occasions. I suspect that if there is a rally, it won't be allowed to gain full traction. In other words, a strong upward move and then crack, Kind of like the market in October 2008

[Yodean]

So the dollar will hit tippy top on Oct 10?

There's this whole theory/idea - very long and mildly convoluted, so I won't try to repeat - that the global financial system, in its current form, at least - functions best (from the USA's perspective as the world hegemon) with the USD in the 90 to 105 to 110 range or so.

Any higher for a sustained period, and the resultant US dollar loan deleveraging, defaults, sovereign debt crises, instability in the eurodollar debt system, etc. will cause the entire global financial system to crash.

You've already seen the beginnings of this with recent BOE actions, as well as BOJ jumping to YCC (yield curve control).

USD higher than 110 or thereabouts brings the Triffin dilemma into focus - I think this is happening now.

The basic idea behind the Triffin dilemma or Triffin paradox is the conflict of economic interests that arises between short-term domestic and long-term international objectives for countries whose currencies serve as global reserve currencies.

USD lower for a sustained period will benefit many foreign countries - including America's enemies - and lessen America's power as the global hegemon - the King of the Hill.

A very high USD is incredibly effective as a weapon for America to apply pressure on foreign countries - a stealth weapon, silent, omnipresent, against which there is no consistent defense - in many ways, much more powerful than nuclear weapons.

Imo the Fed has full control here - so I'm looking for the USD to drop under 110 in the near future. I don't really think the Fed wants to crash the entire global financial system - I still believe in the Happy Slave Theory.

[George1010]

Why Are My Inflation-Protected Bonds Falling When Inflation Is So High?

You would think this would be TIPS’ time to shine. Instead, the prices of Treasury inflation-protected securities—government bonds that are adjusted to keep up with inflation—have declined this year, even as inflation has soared. The comparable loss for ICE’s index of regular Treasury bonds was 13.5%

https://finance.yahoo.com/m/19e1f62a-14 ... re-my.html

[jonnyfrank]

One gets hammered either way if you bet against the trend via TQQQ or SQQQ.

SOL, in regard to your TMF/TLT analysis, you mention a bond market "on fire" yet you then say you will sell in anticipation of lower prices. Can you offer some clarity to this, please?

[SOL]

One gets hammered either way if you bet against the trend via TQQQ or SQQQ.

SOL, in regard to your TMF/TLT analysis, you mention a bond market "on fire" yet you then say you will sell in anticipation of lower prices. Can you offer some clarity to this, please?

The fire is in reference to the rally that could ignite if the Fed offers the tiniest of pivots or even the smallest sliver of good news. It does not mean the start of a new bull, not yet, at least. So, for example, Bonds going from 125 to 140 to 145 ranges over a very short period would fall under the category of fire. However, in the future, instead of using fire etc, that could be misinterpreted as the starting of a new bull. I will state that if X happens, then bonds could mount a very strong rally over a short period, but they will most likely experience one more downward leg before a long-term bottom is in place.

The bond market should have calmed down and possibly already bottomed under normal crooked conditions. However, the Fed is incredibly aggressive and goes out of its way to highlight how it will act as soon as data emerges above their expectations. Everyone knows they will raise rates, but they now seem to be on attack mode where they are trying to convince everyone they are going to be in very aggressive more forever. Perhaps they are playing hard as they are running out of room. The interest rate payment on the debt alone will be horrible, not to mention the damage that is now being caused to pension funds, etc

BOE just pivoted again, indicating that potentially the Fed might soon be pushed into this positions

The Bank of England has announced it will ramp up the scope of its £65bn intervention in gilt markets as part of an "orderly end" to the scheme ahead of its closure on Friday.

In a statement this morning, Threadneedle Street said the rate at which it is buying long-term government bonds will be ramped up from £5bn per day to £10bn per day.

Its decision comes after eight auctions so far in which the Bank offered to buy £40bn worth of bonds but only succeeded in buying £5bn worth.

The Bank has been purchasing the gilts using newly created money in a process known as quantitative easing.

On Monday Threadneedle Street also said it would also launch a "Temporary Expanded Collateral Repo Facility", aimed at providing liquidity to banks whose clients are struggling with sudden cash calls. That will continue beyond Friday.

The Bank first announced the bond-buying scheme on September 28 in a bid to calm market "dysfunction" following Chancellor Kwasi Kwarteng's mini-Budget, which spooked investors and sent pension funds and gilt markets into a "doom-lop" of selling.

https://finance.yahoo.com/news/bank-eng ... 54142.html

Global finance chiefs gather in Washington in the coming days with the warning of a possible $4 trillion loss in the world’s economic output ringing in their ears.

https://finance.yahoo.com/news/danger-4 ... 00541.html


Emerging and developing countries are literally being ripped apart at higher rates. Back in the 1980s, the US was a lot stronger, and even in the 1990s but it's just a shadow of its former self. We manufacture almost nothing these days. So if these nations go down, the US and the West will face many new problems. Hence this extreme rhetoric might be a sign of a turning point. You don't try to convince others if you are sure of your hand; usually, noise indicates uncertainty. Potentially this surge in hawkishness might be indicative that a reversal is not too far in the makings.




History indicates that Extreme spikes in inflation are strong buy signals. Since 1940, in 6 out of the seven biggest spikes, a peak in inflation indicated that the bottom for the stock market was very close at hand; that's an accuracy rate of over 85%. However, one of the most telling signals comes from the intervention conducted by the BOE and BOJ. Also, on average, stock markets were up 13% 12 months after inflation peaked if there was a recession and 17% if there was no recession.

[deepthinker]

Federal Reserve Chairman Jerome Powell is likely to resist behind-the-scenes pressure at international meetings this week to let up on steep US interest-rate hikes that are putting pressure on economies around the world.

The Fed’s most powerful monetary tightening since the early 1980s has sent the US currency surging, rocking developing countries that borrowed heavily in greenbacks, and raising the cost of dollar-priced energy and other imports for richer nations grappling with historically high inflation.

The steep runup in US rates has also increased the odds of a major mishap in financial markets, as borrowers who took on leverage during a decade or more of easy credit find themselves being pushed to the brink. Voices of concern are almost certain to be a feature of annual meetings of the IMF and World Bank in Washington this week, set to be the largest in-person gathering of finance ministers and central bankers since the pandemic began.

“Powell will be vigorously questioned at these meetings about the pros and cons of a more gradual hiking trajectory,” said Citigroup Inc. chief global economist Nathan Sheets, who regularly participated in the semiannual gatherings of finance chiefs as a senior Treasury Department official under President Barack Obama.

Powell and his colleagues have shown no willingness to ease up, and look on track to deliver their fourth straight 75-basis-point hike when they meet to set rates next month. With US inflation at its highest level in four decades, they’ve argued it’s in the best interest of the US and economies around the world that they bring price increases to heel.

“Absent something that resembles a ‘Lehman Moment,’ it’s hard to imagine the Fed will suspend its rate-hike plans.”

Criticism may emerge at the confab over the Fed’s tardiness in launching its tightening campaign, something Powell himself has acknowledged and might have averted some of the current strains.

https://finance.yahoo.com/news/powell-s ... 01673.html

Looks like they are hoping or waiting for Lehman Bro's moment or something simillar, maybe Pension fund collapse, before they act

[SOL]

Goldman Sachs strategists say any volatility shock will lead to further deterioration in market liquidity, something that global central banks are unlikely to tolerate. Supply of liquidity has been poor, they note, with top-of-book market depth in several places close to its worst levels in five years.

Bond markets are already starting to show lines of massive dislocation as trading in US Treasuries has experienced some of the largest swings since the early days of the pandemic, while the gilts market has seen the wildest moves on record. The most recent ructions in the UK forced the Bank of England to buy bonds and take other steps to ensure the market continues to function. This has ignited concerns that the Fed will eventually have to prop up the nearly $24 trillion Treasury market.

“Both the Fed’s large scale purchases back in March/April 2020 and the BoE’s recent intervention were primarily to restore orderly functioning, and highlight the potential for microstructure issues to short-circuit a central bank’s QT plans,” Goldman Sachs strategists led by Praveen Korapaty wrote in a note to clients. “While we don’t anticipate any issues with the Fed’s current QT plan in the near term, the odds of an accident will likely rise as we go deeper into the QT process.”

Now that the US central bank is no longer the largest buyer of Treasuries, it’s unclear who will replace the Fed as the buyer of last resort. Foreign monetary officials purged $29 billion in Treasury securities in the week ended Oct. 5, bringing the four-week decline in holdings to $81 billion, according to Federal Reserve data. It’s the most-extreme outflow since March 2020, leaving total holdings at $2.91 trillion. At the same time, large commercial banks in the US are already shrinking their securities portfolio, versus last year when they were still buying.

Policy makers believe markets are operating effectively, citing the Fed’s myriad of tools that could serve as a liquidity backstop during times of financial stress, such as central bank liquidity swap lines and the domestic and foreign repurchase agreement facilities.

Still, Goldman’s strategists have noted that while the Fed’s repo facilities provide alternative means of market intermediation and raising liquidity, they “aren’t perfect substitutes for risk transfer capacity.”

https://finance.yahoo.com/news/fragile- ... 40472.html

The Fed has been the buyer of last resort; now they are out, banks are bailing out, and Japanese buyers have virtually stopped buying.