Wednesday, May 27, 2009

Today's Bond Market Action: It's Supply, Stupid!

a la Yahoo Finance Bond Ticker [emphasis mine]:

"3:03 pm - SWAT: The bonds fell apart on a wide array of things but the key drivers, outside of the big, chunky, drop-offs attributed to mortgage players, include supply (key culprit). On top of the supply games, notes one long time player, the Chinese games (that they are going to leave our market), the Fed games. You got the yield curve dancing around like Little Richard. There is trouble, when even Fed buying doesn't support prices and good auctions go bad. Which is a good example of what happened, another great auction goes through, and yet prices get clobbered, and as one lifelong market watcher noted So if we have a really bad 7-yr [auction] tomorrow do we rally hard? The best however. This is what happens when you don't have a 7-10-or a long bond rates are just too low."

That says all about today's and maybe tomorrow's action.

As to the reference to mortgage players, they apparently sold the long-end bonds to hedge against rising yields. The corner that the Fed got hedged in seems to get tighter and tighter every single day.

Whoever writes the ticker, he always writes with good information and with dry humor. He covers currencies too. Worth checking at:


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