TMF TLT and Treasuries

[jonnyfrank]

Anyone have an opinion on the insane bond sell off this week? Inflation data is starting to look better, yet bonds get clobbered. Could this be the weekend that NATO invades Ukraine to fight Russia and start WW3? Biden got destroyed in debate....perhaps PTB think war and martial law are the way to go to cling to power (it is working in Ukraine with Z...). Anyone?

[SOL]

One could make up many reasons, and any of them would sound valid, but remember, you can't trade on news. Once it's news, it's priced in. That said, it could have been a bout of profit-taking or concerns about Biden's debate performance, which turned out to be a disaster. Why? If Trump wins, the assumption is that more inflationary forces might be unleashed via the tariff war he will continue. Additionally, the market is waiting for data this week, including job openings figures for May, ADP’s latest private payrolls report, and the June jobs report, which includes nonfarm payrolls. If the numbers indicate an easing of the labor market, hopes for interest rate cuts could be boosted.

[jonnyfrank]

SOL,

After snooping around a bit, I figured out that the current treasury selloff impacting TMF and TLT is Japan dumping a big, big bushel of treasuries to support the falling yen. I found this link helpful, because it explains the concept (dated May 2024) and offers some good insight into the fact that China no longer holds the volume of treasuries that it once did.

Could this idea of a worldwide currency crisis be the potential black swan event that could bring down the world economy in your opinion?

https://www.reuters.com/markets/asia/if ... 024-05-01/

[SOL]

SOL,

After snooping around a bit, I figured out that the current treasury selloff impacting TMF and TLT is Japan dumping a big, big bushel of treasuries to support the falling yen. I found this link helpful, because it explains the concept (dated May 2024) and offers some good insight into the fact that China no longer holds the volume of treasuries that it once did.

Could this idea of a worldwide currency crisis be the potential black swan event that could bring down the world economy in your opinion?

https://www.reuters.com/markets/asia/if ... 024-05-01/

There are so many events that could trigger a black swan effect that it's futile to go over all of them. However, if a black swan event occurs and bullish sentiment is not trading past the 55 mark, there's only one course of action: run out and load up. Yes, it may seem painful at the moment, but remember, pain and loss are often just faulty perceptions influenced by time. Use the wrong time frame, and you're looking at a loss; use the right time frame, and generally, you are looking at a large gain, provided you didn't buy junk.

The sell-off was also exacerbated due to media hype surrounding the Trump effect on interest rates.

[Budge]

.....If Trump wins, the assumption is that more inflationary forces might be unleashed via the tariff war he will continue....

In the current MU, Sol mentions:

The smart move for Trump, then, would be to use tariffs strategically against countries that are more
vulnerable to his pressure

DJT's tariff moves could be insane especially if the belief is to use them to replace income tax. There was a wrinkle I hadn't considered that I read recently. How about the strategic move internal to the US. The poorest will be hit hardest by the retailers passing on this cost of doing business. The poorest being the very sizeable population who pay little or no income tax. Hmm

[rpipunter]

Curious thoughts on truflation? It appears to track fairly well to cpi/ppi/pce trends but it is 15-30 days ahead of them with daily updates in their public dashboard and twitter updates. They report to have a lot more data inputs than the BLS. So far it has been pretty useful for TLT/TMF moves outside of headlines, which we are getting into now with the tariff nonsense. Unfortunately this administration is all about headlines.

But agree with you Budge on the insane tariff moves and who is always likely to benefit.

[MarkD]

Tariffs are a short term issue. In 2018, if memory serves me correctly, the steel tariffs increased cost dramatically for less than a year in the USA after being implemented. After that, pricing was normalized.

Done correctly, it has minimal LT impact on domestic pricing. OTOH, the push to restore industry increases highly skilled labor employment. There will be gyrations undoubtedly.

Another parallel issue is the US dollar which Sol comments on frequently. There are observers who suspect the goal is to increase dollar demand by removing liquidity from the market, which hurts everyone but the USA.

Definitely a difficult balancing act underway.