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The Story
Coming into Thursday, it was clear that rates were going to be the story.
Of course, rising yields have been the story for weeks now, but fireworks in Kiwi and Aussie bonds set the stage for similar dramatics stateside, and Treasurys didn't disappoint.
It's probably fair to say that Thursday will go down as one of the more memorable sessions of 2021 for US rates, and especially for intermediates. Five-year yields screamed higher, in an eye-popping move worthy of all the digital ink spilled doc
Until Jerome Powell whispers “QE 7,” cash looks pretty good to me.
I’m ready to risk my fingers catching a falling knife, bought TLT calls, but I’ll admit it feels awful risky, like buying bitcoin…
Yeah, risky. On a long enough timeframe, Treasuries can go to zero, too.
I’m with you Evil Twin. But sure would be nice to catch that negative convexity train steaming the OTHER direction for a day or two. Hopefully J-Pow is in the telephone booth getting his Superman costume on!
The following quote is from CME Group, Dec 29, 2020, posted as Fed Balance Sheet:
“The Fed desk began its operations with an immediate purchase of $40 billion in nominal coupon securities and Treasury Inflation-Protected Securities (TIPS). In further action related to the coronavirus pandemic, the Fed announced on March 23, 2020 that its purchases of Treasury securities will be in amounts “as needed” to promote a swift recovery.”
I ran across that story last week, because I was curious about the massive amount of inflation jawboning related to inflation.
I was also looking at FRED: https://fred.stlouisfed.org/graph/?g=Bpgx
It sort struck me that this is like the scene in It’s a Wonderful Life:
“Can’t you understand what’s happening here? Don’t you see what’s happening? Potter isn’t selling. Potter’s buying! And why? Because we’re panicky and he’s not. That’s why. He’s picking up some bargains. Now, we can get through this thing all right. We’ve got to stick together, though. We’ve got to have faith in each other.”