Murmurs From the 10-Year Note

287
Sat, Aug 18, 2012 - 12:43pm

What happened? Just a few weeks ago, we were worried that the treasury market was becoming a "black hole" that would soon suck in all financial assets. Instead, rates have reversed significantly. What does this mean and what does it portend?

First of all, here's where we were back in late July. The 10-year note had just fallen through 1.40% and it had everyone's attention: https://www.tfmetalsreport.com/blog/4046/two-things-my-mind. Here we are, 3-4 weeks later, and were at 1.82%. That is a HUGE move! What the heck happened? I think I have an answer but, first, some background.

Take a look at these two charts. One a is daily 10-year and one is a weekly. Note that the current price of the 10-year is 132.50. This is important because the area around 132 appears to be very important support. You can plainly see horizontal support on the daily chart but, looking at the weekly chart, 132 is also near the trendline from the lows of late spring 2011. Breaking that support and that trend would set a top and would foreshadow a move to 127-128. Now, look at the weekly chart. Notice that 10-year prices have been in a very long term up channel. Then notice that the past three Fed "programs" have been initiated when prices were near the top of the channel.

So, what is going on? Why the sudden dropoff in price? I think I have the answer. I posted this presentation yesterday. You may have already watched it. Watch it again and stop it right at the end, near the 57 second mark.

Fed vs. Private Sector Treasury Holdings

OK, just a couple more things and then I'm taking the rest of the weekend off. First, yesterday's CoT was very interesting, particularly in silver. Before jumping to conclusions, I'm going to wait to see what Uncle Ted thinks of the disaggregated report. In the meantime, here's a C&P of my comments from yesterday afternoon:

Submitted by Turd Ferguson on August 17, 2012 - 2:59pm.
MODERATOR
I had expected gold to be a non-event and it was. For the reporting week, price fell $10 and OI only fell by 67 contracts. The only item of minor note was the 2,478 net drop in The Gold Cartel net short position which brings their net short ratio back under 2 at 1.98:1. Again, this is historically low and very bullish.
The action and the intrigue is in silver. For the reporting week, silver fell 32c but total OI rose by 4700. Obviously, there was a lot of new buying and selling going on. The question was/is: Just whom was on each side? Well...whaddayaknow...it looks like we have a civil war starting in silver.
For the week, The Silver Cartel total long position grew by 3,202 contracts. This is likely the silver "raptors", as Uncle Ted likes to call them. However, The Silver Cartel total short position also grew by 4,752 contracts. This is likely JPM but I'll wait to see who Ted fingers in his report tomorrow.
I've never seen a Silver Cartel long position this high before. Never. Maybe it has been but I sure as heck don't remember when. For perspective, on 2/28/12 it was 33,802 and on 4/20/11 it was 34,043. Nearly identical levels before sharp beatdowns. On 12/27/11, just before a 2-month, 20% UP move, the total long position was 41,224. Now it's 47, 797!
Similarly, the total short position is unusually large. The last time it was this high was on 3/6/12, just after the peak and subsequent beatdown of late February. In the recent past, it has been as high as 89,827 on 4/6/11 and as low as 55,356 back on 12/27/11.
At first glance, we appear to have the makings of a civil war. Instead of acting collusively, the smaller banks seem to be buying and thus attacking the short position of JPM. To contain price, JPM is being forced to issue new paper independently. Again, this is how it appears. Let's wait until Uncle Ted dissects the report before jumping to any more conclusions.
Perhaps the smaller sharks smell blood in the water. Maybe they sense the opportunity to trap JPM on the short side and squeeze the daylights out of them. Could these banks be expecting an historic, hot and explosive move in the weeks ahead???

And then there's this. While researching this post, I came across this video from March 19th. I don't know who this Ilcyzsyzn guy is but, right now, he looks like Nostra-freaking-damus! Hopefully, he's made himself enough money over the past six months that he can buy himself a couple of vowels.

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

I hope everyone has a great weekend. Relax and prepare mentally for everything that is soon to come.

TF

About the Author

Founder
turd [at] tfmetalsreport [dot] com ()

  287 Comments

Missiondweller
Aug 18, 2012 - 1:48pm

Turd, one of your best posts

Very insightful. Thanks for pointing out what I missed. I hope people reading this will understand its importance:

  • The FED is out of bullets without more OVERT QE.
  • Higher rates may be crushing Primary Dealers (possibly a tipping point going into Fall)

Most important, THE FREE MARKET IS RE-ASSERTING ITSELF and is overpowering Fed actions.

Anonymous
Aug 18, 2012 - 1:49pm

Removed comment

Removed comment.

Anonymous
Aug 18, 2012 - 2:07pm

Removed comment

Removed comment.

maravich44 Anonymous
Aug 18, 2012 - 2:13pm

peckerwood,

yes. Please stay around, I enjoy your company. https://www.youtube.com/watch?v=6VIECzlFVUM

alphamorph
Aug 18, 2012 - 2:17pm

Outperforming Congress

Marc Hujer of Der Spiegel had this to say on Aug17/2012

“The current Congress, the 112th in US history, is the most unproductive since the end of World War II. It enacted only 80 laws in 2011, fewer than any Congress has done since 1947, despite the great need for reform and the ongoing budget crisis. The US Congress has failed to achieve a united position on the war in Libya, climate change, immigration, tax policy, reforming the country's social welfare systems and other important issues of the day. The Joint Select Committee on Deficit Reduction failed.

My wife suggested that their pay be cut accordingly to which I replied, "Ya, we'll all pull up a picket off the fence (for placard construction), pile into our pickups and head for Washington where we'll be greeted by the most heavily armed (and militarily trained) police force in the history of U.S.. For icing on the cake, it appears they've been doing a lot of riot preparation lately.

Or…. I can simply curl up with the old girl in front of the ol’ big screen, watch reruns of Starsky and Hutch and scoff down a big plate of French fries smothered with (RonnieR’s favourite vegetable), ketchup.

clueless one
Aug 18, 2012 - 2:18pm

couple of good videos...

hope you enjoy...but more importantly, learn something.

Eustace Mullins presents: The World Order.flv
K Rino Grand Deception
tyberious
Aug 18, 2012 - 2:19pm

Silver Set to Rise by 15%-25% by December

https://www.ftmdaily.com/audio/pmmu-081812.mp3

Major suppliers are reporting that massive buy orders have been placed on 100 oz Comex silver bars which could send silver prices soaring by $2-$4 per ounce in a very short period of time. Tom is declaring both gold and silver in an “all buy” mode. Tom expects to see even more gold buyers strongly entering the market by the close of business next Wednesday. He also expects much of the shorts in the market to dissipate by the middle of next week as we head into the biggest buying season of the year for gold and silver.

The Indian harvest season, the Chinese New Year, and the coming U.S. fiscal cliff are all set to drive prices higher and the U.S. dollar lower. In fact, over the last 11 years, the U.S. dollar has faced strong headwinds in the month of September because of the massive U.S. deficits.

The writing is on the wall as both major hedge fund managers and central banks are buying gold in large, even record, amounts.

By the end of the year, Tom expects silver prices to rise by 15%-25% and gold to rise by 10% or more.

tyberious
Aug 18, 2012 - 2:22pm

Good Stuff

Great investigative analysis Turd!

Mr. Smith
Aug 18, 2012 - 2:38pm
Aug 18, 2012 - 2:40pm

nothing new(s), but relevant:

TREASURIES-U.S. debt prices edge up, FOMC minutes in view

LONDON | Fri Aug 17, 2012 2:56pm IST

Aug 17 (Reuters) - U.S. government bond prices edged higher on Friday as buyers crept back into the market after a steep fall earlier this week pushed yields up to levels that proved attractive to some.

* U.S. debt sold off in the first half of the week after economic data beat expectations and prompted some players to push back their estimate of when the U.S. Federal Reserve will resume buying bonds to lower rates and stimulate the economy.

* However, that move hit technical resistance when 10-year yields rose to 1.86 percent, just shy of the 200-day moving average. Since then investors with a negative medium-term outlook on the U.S. economy and health of the euro zone have bought back in, driving yields down to 1.83 percent.

...

https://in.reuters.com/article/2012/08/17/markets-bonds-treasuries-idINL...

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