Keep Watching The Bond Market

The past week has seen some rather sharp selloffs in the U.S. treasury market. Is "Operation Twist" failing? Will we soon see a resumption of overt quantitative easing?

Diligent Turdites will recall that we've been discussing this possibility for months. For me, the key to correctly anticipating the resumption of overt QE is found in watching movements of long-term interest rates. As often stated here, The Federal Reserve cannot allow interest rates to rise. Keeping rates low and funding the federal budget deficit are the two, primary goals of quantitative easing. Therefore, dropping bond prices (higher interest rates) signal that more QE (Fed buying on bonds) is necessary.

Well, what to make of these charts? We know from reviewing the long-term charts of the 10-year and the Long Bond that previous drops in price preceded the announcement of QE1 and QE2. We're almost there again. The 10-year is now perched precariously above the all-important 127.50 level and the Long Bond just had it's initial test-and-hold of support at 135. Note that, prior to these latest drops, the bond and the note had been in rather tight ranges since the Fed began "Operation Twist" in September of last year.

paper_3-20am10yrd.jpgpaper_3-20am10yrh.jpg

paper_3-20am30yrd.jpgpaper_3-20am30yrh.jpg

With bond prices being near these critical levels and having gotten there so quickly, we almost have to expect a rally here. The question then becomes: What happens next? I'd expect 127.50 and 135 to hold for a while longer but, if those levels fail, QE3 should be right around the corner. Already, there are some folks out there who think that The Fed will announce QE3 in April or June. http://www.zerohedge.com/contributed/2012-10-05/probability-map-morgan-stanleys-vincent-reinhart-still-says-75-chance-fed-qe3 If rates keep rising, those pundits will be proven correct.

The current beatdown in the metals began inexplicably last evening. Whenever you see gold drop seven or eight bucks, out of the blue, on no news, at 9:00 pm EST, you know that a raid is coming. Lo and behold...we got one. Gold reached all the way down to $1640 overnight and silver touched $32. That the selloffs ended there should be no surprise to anyone as those are currently our two main, short-term support levels. For now, the pressure is off but there's really no reason to get excited just yet. The metals remain in their recent ranges. Gold between $1640 and $1670, silver between $32 and $33. Once the metals pop UP and out of those ranges, the bottoms will be set and we can begin to get excited again. Until then, I'm waiting patiently just in case one more leg down toward $1625 and $31 develops.

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I hope you have a fun and stress-free Tuesday.  TF

218 Comments

wonderer's picture

First?

Could it be?

It is! Amazing. I am always late to the party here, but today I am on time. 

Dr G's picture

It is!

Things are aligning for QE3 announcement at Fed meeting near the end of April perhaps.

squib's picture

Turd keep up the great

Turd keep up the great work!

Came across this:

http://finance.yahoo.com/blogs/breakout/wait-gold-bottom-1525-ilczyszyn-202824187.html

I'm in agreement with so many on ZH...hoping for some kind of crash in all markets/economy so we can start over again.

It is quite frustrating seeing the manipulation and control week by week. Been trying to point out these things to as many folks as possible...failing miserably as they point to the stock market, the administration pounding in everyone's ears that the recovery is here and ongoing, lower and lower unemployment numbers. So...I just keep buying new guns and making more ammo while polishing shooting skills twice a week. What a great hobby, shooting and re-loading. I just picked up a Kimber CDPII with crimson trace laser, wow, what fun! Another M1A is next.

After being awake for a few years and no TV for 10 years...the fraud, lies and manipulation seems so obvious to me at times that I have trouble being contained when pointing out propaganda to folks...

boatman's picture

MBS's

i hear the fed's target......and anthing house related.

after all, there's an election coming.

murphy's picture

Cinco de Mayo.... not quite

Cinco de Mayo.... not quite

Loud Noises's picture

@Apples, thanks

Apples gave a heads up in the last thread to the one day sale over at Silvertowne with the "spring" coupon code to save $20 off $200 or more.  That let me get a nice 10 oz Silvertowne bar for $329, free shipping.  Woohoo!  I was going to head to the LCS for some halves but that can wait.

Thanks for the heads up and I recommend the deal to others who want to add to the stack today.

Turd Ferguson's picture

And anorther thing...

MODERATOR

I remember way back when rising rates were bad for stocks. The idea being that rising rates made bonds a more attractive investment alternative. Well, apparently not anymore...at least not while The Fed controls each and every "market".

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¤'s picture

Petro-dollars and the 10 yr UST

Thanks for the update. The 10 yr  has a tug of war going on somewhere.

U.S. tolerance of $100+ oil in an election year tells me they have an arrangement of sorts with the Saudi's to purchase US debt with some of that extra oil revenue because the US is somewhat desperate for revenue's other then their own (Treasury/Fed) buying of our own debt. JMHO

Does anyone really hear any US politician strongly vilifying the price of oil right now? (crickets)

My guess would be that most of them understand the recycled petro-dollar into UST's that's been going on since the 1970's and how critical it's been and is now. They had to let the rates raise  over %2.0 to get the Saudis to recycle even more petro-dollars into UST's imo. Whatever might be going on in the UST's lately the one thing I know for sure is that indeed something is going on.

My guess is that a large part of it is from these recycled petro-dollars and the resumption of 3rd party UST buying by China via the UK. I also believe that very recently that Israel mad e a decision to invest heavier into UST's if I'm not mistaken.

Add them all up (plus the buyers of UST's we don't know of and the one's we do ~Treasury/Fed) and you have a frothier UST market then just a couple months ago.

 

OPEC Recycles Dollars Into Debt 50% Faster Than Foreigner

OPEC nations are plowing cash into U.S. Treasuries at a more than 50 percent faster rate than all other foreign investors, an unintended benefit of oil prices above $100 a barrel.

Organization of Petroleum Exporting Country members boosted their net purchases of government debt by $43.3 billion, or 20 percent, in the 12 months ended Jan. 31, compared with a 13 percent increase for non-OPEC foreign holdings...

http://www.tfmetalsreport.com/comment/144670#comment-144670

Turd Ferguson's picture

Just saw this ad

MODERATOR

on my site (placed there by Google).

So, this guy is an "overachiever" because he has purchased a fucking CD at 1 fucking percent? Give me a break! This is the world we live in now?

medium_14994483458592221523.jpeg

And I love how it's from "CIT Bank". Just another piece-of-shit, government-owned bank (like Ally) that has risen from the ashes of a bankrupt entity, in this case CIT.

¤'s picture

'Code' during war's build-up

Saudi Arabia Can Raise Output 25% If Needed, Naimi Says

Saudi Arabia (OPCRSAUD) can increase production by as much as 25 percent immediately if needed, the country’s oil minister said, seeking to allay supply concern that has driven prices to the highest in three years.

“If you believe Hormuz will be closed, I will sell you the Empire State or the Egyptian pyramids,” Ali al-Naimi said in a briefing with reporters in Doha, Qatar today. “I want to assure you that there is no shortage of supply in the market. OPEC is supplying what it needs, we have capacity, additional reserves of 2.5 million barrels” a day, he said.....

http://www.tfmetalsreport.com/comment/144824#comment-144824

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

The Kingdom of Saudi Arabia stating that they can raise the output of their oil production by 25% immediately tells me that it's allies have nothing to worry about when hostilities break out and oil spikes. That's fairly unprecedented language from them. 25% immediately?

That means they'll un-spike it, immediately from whatever level it would surge to.  Now think about the one hand washing another with oil, UST's and recycled petro-dollars.

apex101's picture

KWN

Turd should do a KWN interview. That be classic. They just show the hat as the main pic on his interview section.

Velocity's picture

Lookin Good... Lookin...

Crap!!

I'm not sure how "inexlipicable" it is Master Turd, we've been in a downtrend (looking for nothing but an uptrend!) since Santa brought us a kick in the teeth

On that note i don't want us to be like Santa, Jim Sinclair, and those rampers over at King World News (who are ramping the hopium again today, surprise surprise) and only look at the upside

For 3rd or 4th time of asking Mr T why do we only for the upside? Maybe we're missing the downside because we don't look to trade short. Er, why???

We're stacking for the long-term so us stackers don't mind the price fluctuations, in fact we don't give a rats arse for them. 

But if we're trading why always look for the up. Jim Sinclair is an ex stockbroker and also only advises his flock of sheep on the upside and never a serious word spoken to the downside on KWN either. We've got hopium by the boatload but no sense of reality markets go down as well is up

So what's 'up' with trading/looking for 'downs' Turdy?

 
cwavec's picture

You are being watched!

No matter who you are, where you are or what you do, you are being watched.

And just in case, I am posting here so anyone who reads here or posts here can be careful.

Half an hour or so ago, DHS showed up at my door. I had walked into the kitchen and saw

a black jeep parked in the driveway and two men inside. I walked onto the balcony and waited

till they got out. When they saw me, they asked for me by name. Where they got my name, I don't

know. What they really wanted, I don't know either but the questions they asked simply don't

make any sense, at least in relation to the way I live. And the "information" they had was

entirely without any basis in fact. So I think they must have been on some kind of fishing

expedition. They flashed their IDs - one was from DHS, the other from FDA. I thought I

was in trouble for buying French cheese!

Once I acknowledged that my name is the same as the one they mentioned (and by the way, there

are at most two or three other people in the entire world with the same name as mine), they said

they wanted to "come in and sit down" to ask me some questions. Well, I refused that and it turned

out that the questions they asked would never have justified such a request anyway. So, obviously,

for whatever reason, they thought they were going to have a good look around.

They said I had received, in June 2010, a shipment, apparently from an Ebay purchase, of some

opioid drugs (I looked it up later). One is Nubane, which I had never heard of and the other was

a longer, pharmaceutical sounding name that I don't now remember. They asked a couple of other

fairly innocuous questions (did I ever buy any drugs over the internet, da da da da).

It's really creepy and what they asked is so off the wall that I just don't believe that was the

real purpose.

Maybe this is not the right forum for a posting such as this. I acknowledge it is pretty much off

topic but in light of some more or less political comments sometimes seen or ones that might be

considered a bit more "inflammatory", I think the community should be aware that this is going on.

¤'s picture

As a young boy...

...I followed the news as close as any young person might be expected to.

This is me at 7 with my favorite toy...

Here's tomorrows news today....

http://www.tfmetalsreport.com/forum/3172/daily-dphaze-news-machine

newsboy.jpg

That is definitely not me wink

Exbroker's picture

QE 3 started along time ago.

Let's just call it what it is. QE to infinity. Nobody really knows how it works or when it will start or end, because it's all a mirage.  I'm not trying to be a dick. I have been around for a long f,in time. My family lived under the thumb of the "RChilds " for allot of years in Europe. They own everything. Because of the technology that they gave us...we have very little chance of saving ourselves from them.  They are allways three steps ahead of us. I love to read discussions people have after reading an article about NDAA or martial law. Because, they only bring these new plans about until they are pretty certain that we have no chance of defeating it. Allot of people think that we can make a difference. It's a few decades too late for that. TECH  BEATS CONSTITUTION NOW Everyone talks about the Constitution. Forget that ZOMBIE fans. That is gone. That is unless you can convince our brain dead children otherwise.  A majority of them think you are the brain dead one. Good fucking luck. I have been fighting this fight since the 1980's. I hear allot of tough talk. I see no progress at all. Just a bunch of brain dead spawn of the me generation. And...you know who's fault that is. And if I am insulting you...good. Get used to it. You deserve it at much I as do, because I am just as guilty as you are. I'm willing too admit my mistakes. I thought with my reprobate mind that I could make a difference. I thought I could fight the NWO.  That is not going to happen. All of my stacking is never going to buy me shit. All these bastards have to do is this....Ol is now money. Fuck Silver and Gold. We can change the ground rules anytime we want. God, might have a problem with that. He told us what money was in the days of Adam. But that is not for me to debate. God has that covered. 

I am going to be honest with you. You can not!!! Escape these demons. And, that is what they are. I'm not telling you not to fight, but we were given the means to fight in the the Gospel of Jesus. And....because we are men and STUPID we try control everything. Here we go....that trust thing just gets in the way all of the time. Oh my God...We are not in charge! FUCK...That is not going to happen. I would bet you a gold coin, but if I did win, it would be worth nothing if you thought about it.  

worldend666's picture

>>For 3rd or 4th time of

>>For 3rd or 4th time of asking Mr T why do we only for the upside? Maybe we're missing the downside because we don't look to trade short. Er, why???

​Have to say I agree. The fiat game is a just that: a game. Paper gold/silver will not shoot to the moon with physical. When Physical has its day the paper will be worthless, so in my view this site should have a trading section which goes both short and long. Trading paper gold/silver has nothing to do with stacking physical.

GoldMania3000's picture

BEN B

just told cnbc that we are seeing interest rates rising

Number 47's picture

@exbroker

My kids are not brain dead, neither are many.

The things you are saying have been said of every generation before. How far back do you want to go?

"I see no hope for the future of our people if they are dependent on
frivolous youth of today, for certainly all youth are reckless beyond
words... When I was young, we were taught to be discreet and
respectful of elders, but the present youth are exceedingly wise
[disrespectful] and impatient of restraint" (Hesiod, 8th century BC).

Or.

"The children now love luxury; they have bad manners, contempt for
authority; they show disrespect for elders and love chatter in place
of exercise. Children are now tyrants, not the servants of their
households. They no longer rise when elders enter the room. They
contradict their parents, chatter before company, gobble up dainties
at the table, cross their legs, and tyrannize their teachers.

ATTRIBUTION: Attributed to SOCRATES by Plato, according to William L.
Patty and Louise S. Johnson, Personality and Adjustment, p. 277
(1953)."

The world has dumbed down a lot but let's not blame an entire generation, especially when it is just the product of the one which came before. Let's face it, the boomers certainly did well for themselves at the next generations cost. They didn't really leave a lot of hope but there were many who tried to change things, we can't blame them all.

SRSrocco's picture

Ali-al-Naimi IS F.O.S

HOW TO BAMBOOZLE THE SHEEP WITH BIG NUMBERS

Ali-al-Naimi is completely F.O.S.  There is no way Saudi Arabia can increase production 25% or nearly 2.5 million barrels a day.  This is a way of trying to keep OIL PRICES DOWN.  We must remember, the attack on Iran is underway.  The Game Plan has been made and  is now being followed to the TEE.

I am surprised anyone believes anything coming out of D.C. or the MSM any longer.  There is evidence now that the EIA - Energy Information Agency is FORGING production figures.  This of course should come as no surprise as M.O.P.E is the new agenda.

Anyone who is still waiting for an OFFICIAL ANNOUNCEMENT for QE 3 to begin.... needs to get a BRAIN MRI as well as sell all their gold- silver and buy ULTRA LONG TREASURY ETFS.  QE has never stopped.  The only news one should watch on the BOOB TUBE is if a Tornado, Hurricane or Accident took place.  Everything else after that has been massaged beyond recognition.

I sit here in a Coffee House typing on my computer looking around at all the poor mortals who have no clue of what is going.  They have this NOTION in their mind that the future will be as it has  been.  Their kids will grow up and go to college and their 401k will be there to take care of them when they retire.  They continue to live in a world based upon this future they perceive in their mind.  Unfortunately, this perception will end shortly.

At times I think whether or not I should continue writing articles on Silver, Gold, Mining, Energy the EROI or NET OIL EXPORTS any longer.  My gut tells me the BIG ONE is coming and all of this in reality is complete NONSENSE.

I sure hope I am wrong....  time will tell.

ClinkinKY's picture

@ cwavee

I thought I

was in trouble for buying French cheese!

That'll teach you to stick to good old American Wisconsin cheese:)

Dobocop's picture

@velocity

Read the Turd's posts, pretty clear to me he sees a touch of 31 as bottom.

apex101's picture

God you know how many people

God you know how many people i know that have large amounts of money in CD's. Its almost unbelievable. I don't even bother to explain because you either get

1) your a conspiracy theorist and they start to abuse you or 

2) some one takes interest but never acts.

Exbroker's picture

As Lindsey Williams once said...

I beg of you......That drove me crazy. Lindsey was trying to sell you a CD. I'm trying in a round about way to sell you on a concept that just may change your life.. I can't make you do anything, and I will never try. My job is to tell you. That's it. Enjoy your night. 

dropout's picture

The Misery Index

Time to have a look at the old 'Misery Index'. If you were around, remember that one from the eighties?

Inflation rate + unemployment rate = Misery Index

Past: Historic high occurred in June 1980 at 22.0%

Today: Unemployment rate (official) 8.4% + 3.2% consumer price index (official) = 11.6%

However, its worth noting that this total is based upon governmental accounting, the use of which would quickly put an ordinary citizen into jail for fraud if they tried to use such a standard for private business standards!

So, lets have a look using John William's shadow stats, which IMHO are much more conducive to truth.

Unemployment (full real) rate at 22.3% + 11.2% consumer (real) price index = 33.5%! 

A full 11.5% higher then the all time high! Little wonder when you consider the amount of pessimism present! 

Just one more of those "fundos" to bear in mind when deciding to add to your stash. 

worldend666's picture

@SRSrocco

>>I sit here in a Coffee House typing on my computer looking around at all the poor mortals who have no clue of what is going.  They have this NOTION in their mind that the future will be as it has  been.  Their kids will grow up and go to college and their 401k will be there to take care of them when they retire.  They continue to live in a world based upon this future they perceive in their mind.  Unfortunately, this perception will end shortly.

Hehe. Ever seen Beautiful Mind? 

Think about it.

Ok flame me guys. I am ready.

Exbroker's picture

APEX

You can not help the dead. You can give them the Gospel. That's it. Give your gift to those who care, and want to hear you. Way to many people who only give a shit of one thing here. The reason would be because they only care about money and the standard of living they want. Get over it. You will find piece soon enough.

Turd Ferguson's picture

This isn't complicated...

MODERATOR

...so please don't imply that I'm hiding from you.

This current platform is for investors and "stackers".
1) investors and stackers should rarely, if ever, be looking to reduce their "stack" and sell. This would be foolish and why would a site that is designed to help prepare for the end of the Great Keynesian Experiment" advise people to sell metal in the hope/expectation that prices may be about to decline a few percent?
2) additionally, what if someone sells their phyzz and price doesn't decline? Then what? Totally defeats the purpose of stacking.

Now, that said, the new subscription service will provide targets specifically for traders, not investors/stackers. On that platform, we'll be able to discuss long AND short ideas.

I hope this answers your question.

lairdwd's picture

silvertowne spring code

Sweet. Thanks for that code - "spring" . I ordered 7 2012 eagles and was able to use my AMEX card, which gives 2% back. None of the other merchants take AMEX.  $37 per eagle, a little more pricey, but with the code - makes it a good deal for me. 

agNau's picture

Saudi's raise output?

Maybe......but the Saudi's cannot drain trillions of dollars out of circulation.
Tick, tick, tick, as the fuse grows shorter.

******
With the bond support(QE) will come the miraculous recovery chorus from wall street(markets zooming higher)....and praises to the greatest administration EVER! With blinders firmly affixed, inflation will be nowhere to be found!!!( hidden or denied)
What we are witnessing is all stops pulled to extend and pretend while driving every other economy down to attempt to break them first and maintain control over global banking. The Anglo banking system is throwing the "Hail Mary".....and hoping for the above stated outcome. Revenge will come......therefore we have seen the "Resource Preparedness" EO signed.
Preparing for the revenge.
The precious metals ALWAYS win.

Mickey's picture

Primary Dealers

I bet that the primary dealers--who had a "sure thing" buying treasuries were not so happy with their sure thing last week as prices on treasuries fell 2.7% and are putting pressure to lower rates so there is no controversy over valuing treasuries at market value. Or full vale. Or mark to fantasy.

How would the stress test look if they had to mark down their leveraged treasury holdings by 5%, since the test assumed 1.5% writeoffs for entire portfolio (and when FDIC is closing banks with 50% write downs) ?

The power of the pen.

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