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  • February 18, 2008 at 4:03 AM #155048
    gdcox
    Participant

    Graham

    The ten year is too low. There has been a flight to safety worldwide that has pushed yields down abnormally .

    February 18, 2008 at 11:42 AM #155313
    davelj
    Participant

    The 10-year treasury has historically mean reverted to 250 bps real return and about a 300 bps inflation premium. (So, it’s averaged about 5.5% over the last 80 years.) The current on-the-run 10-year TIPS are yielding about 1.50% while the current 10-year nominal yield is about 3.80%. So, the market is pricing in that 10-year treasury buyers will be perfectly happy for the next 10 years with (1) a 1.50% real return, and assuming that (2) inflation will average 2.30% annually over the period. Neither of these seem like particularly good bets. But it could be a while before the prices mean revert.

    February 18, 2008 at 11:42 AM #155236
    davelj
    Participant

    The 10-year treasury has historically mean reverted to 250 bps real return and about a 300 bps inflation premium. (So, it’s averaged about 5.5% over the last 80 years.) The current on-the-run 10-year TIPS are yielding about 1.50% while the current 10-year nominal yield is about 3.80%. So, the market is pricing in that 10-year treasury buyers will be perfectly happy for the next 10 years with (1) a 1.50% real return, and assuming that (2) inflation will average 2.30% annually over the period. Neither of these seem like particularly good bets. But it could be a while before the prices mean revert.

    February 18, 2008 at 11:42 AM #155222
    davelj
    Participant

    The 10-year treasury has historically mean reverted to 250 bps real return and about a 300 bps inflation premium. (So, it’s averaged about 5.5% over the last 80 years.) The current on-the-run 10-year TIPS are yielding about 1.50% while the current 10-year nominal yield is about 3.80%. So, the market is pricing in that 10-year treasury buyers will be perfectly happy for the next 10 years with (1) a 1.50% real return, and assuming that (2) inflation will average 2.30% annually over the period. Neither of these seem like particularly good bets. But it could be a while before the prices mean revert.

    February 18, 2008 at 11:42 AM #155214
    davelj
    Participant

    The 10-year treasury has historically mean reverted to 250 bps real return and about a 300 bps inflation premium. (So, it’s averaged about 5.5% over the last 80 years.) The current on-the-run 10-year TIPS are yielding about 1.50% while the current 10-year nominal yield is about 3.80%. So, the market is pricing in that 10-year treasury buyers will be perfectly happy for the next 10 years with (1) a 1.50% real return, and assuming that (2) inflation will average 2.30% annually over the period. Neither of these seem like particularly good bets. But it could be a while before the prices mean revert.

    February 18, 2008 at 11:42 AM #154935
    davelj
    Participant

    The 10-year treasury has historically mean reverted to 250 bps real return and about a 300 bps inflation premium. (So, it’s averaged about 5.5% over the last 80 years.) The current on-the-run 10-year TIPS are yielding about 1.50% while the current 10-year nominal yield is about 3.80%. So, the market is pricing in that 10-year treasury buyers will be perfectly happy for the next 10 years with (1) a 1.50% real return, and assuming that (2) inflation will average 2.30% annually over the period. Neither of these seem like particularly good bets. But it could be a while before the prices mean revert.

    February 18, 2008 at 5:37 PM #155106
    Chris Scoreboard Johnston
    Participant

    I hate to disppoint the post about small investors moving the prices of this instrument. However, as someone who routinely commits to trades of seven figures and never sees the market move even a tick on the fills, I have to tell you that small investors have no influence at all in this market. Even a Goldman Sachs can only move prices for a few seconds so make no mistake about it, those models you refer to are exactly what determine where this market goes.

    The seasonal bias heavily favors a upward move in yields into June, followed by a downward move through the end of the year from there. This has been particularly prominent during election years. The logic behind that I think is obvious, but that has what has historically occurred. The commercials are kind of in the middle here as far as positioning goes, so they are of no help at the moment in terms of guessing about direction. As a result, my guess is higher rates for the next few months, followed by a decline from there for the balance of the year.

    I will be looking to put a long postion on in June and hold it through years end, unless something has changed dramatically leading up to that date.

    February 18, 2008 at 5:37 PM #155384
    Chris Scoreboard Johnston
    Participant

    I hate to disppoint the post about small investors moving the prices of this instrument. However, as someone who routinely commits to trades of seven figures and never sees the market move even a tick on the fills, I have to tell you that small investors have no influence at all in this market. Even a Goldman Sachs can only move prices for a few seconds so make no mistake about it, those models you refer to are exactly what determine where this market goes.

    The seasonal bias heavily favors a upward move in yields into June, followed by a downward move through the end of the year from there. This has been particularly prominent during election years. The logic behind that I think is obvious, but that has what has historically occurred. The commercials are kind of in the middle here as far as positioning goes, so they are of no help at the moment in terms of guessing about direction. As a result, my guess is higher rates for the next few months, followed by a decline from there for the balance of the year.

    I will be looking to put a long postion on in June and hold it through years end, unless something has changed dramatically leading up to that date.

    February 18, 2008 at 5:37 PM #155392
    Chris Scoreboard Johnston
    Participant

    I hate to disppoint the post about small investors moving the prices of this instrument. However, as someone who routinely commits to trades of seven figures and never sees the market move even a tick on the fills, I have to tell you that small investors have no influence at all in this market. Even a Goldman Sachs can only move prices for a few seconds so make no mistake about it, those models you refer to are exactly what determine where this market goes.

    The seasonal bias heavily favors a upward move in yields into June, followed by a downward move through the end of the year from there. This has been particularly prominent during election years. The logic behind that I think is obvious, but that has what has historically occurred. The commercials are kind of in the middle here as far as positioning goes, so they are of no help at the moment in terms of guessing about direction. As a result, my guess is higher rates for the next few months, followed by a decline from there for the balance of the year.

    I will be looking to put a long postion on in June and hold it through years end, unless something has changed dramatically leading up to that date.

    February 18, 2008 at 5:37 PM #155406
    Chris Scoreboard Johnston
    Participant

    I hate to disppoint the post about small investors moving the prices of this instrument. However, as someone who routinely commits to trades of seven figures and never sees the market move even a tick on the fills, I have to tell you that small investors have no influence at all in this market. Even a Goldman Sachs can only move prices for a few seconds so make no mistake about it, those models you refer to are exactly what determine where this market goes.

    The seasonal bias heavily favors a upward move in yields into June, followed by a downward move through the end of the year from there. This has been particularly prominent during election years. The logic behind that I think is obvious, but that has what has historically occurred. The commercials are kind of in the middle here as far as positioning goes, so they are of no help at the moment in terms of guessing about direction. As a result, my guess is higher rates for the next few months, followed by a decline from there for the balance of the year.

    I will be looking to put a long postion on in June and hold it through years end, unless something has changed dramatically leading up to that date.

    February 18, 2008 at 5:37 PM #155484
    Chris Scoreboard Johnston
    Participant

    I hate to disppoint the post about small investors moving the prices of this instrument. However, as someone who routinely commits to trades of seven figures and never sees the market move even a tick on the fills, I have to tell you that small investors have no influence at all in this market. Even a Goldman Sachs can only move prices for a few seconds so make no mistake about it, those models you refer to are exactly what determine where this market goes.

    The seasonal bias heavily favors a upward move in yields into June, followed by a downward move through the end of the year from there. This has been particularly prominent during election years. The logic behind that I think is obvious, but that has what has historically occurred. The commercials are kind of in the middle here as far as positioning goes, so they are of no help at the moment in terms of guessing about direction. As a result, my guess is higher rates for the next few months, followed by a decline from there for the balance of the year.

    I will be looking to put a long postion on in June and hold it through years end, unless something has changed dramatically leading up to that date.

    February 19, 2008 at 11:37 AM #155121
    HereWeGo
    Participant

    That would have been a fine trade in 2007, no doubt about it.

    Update:

    The 10-year is getting whacked today, the yield is at 3.9 and climbing. 30-year mortgage rates are higher today (5.82) than 1 year ago today (5.77,) according to Bloomberg.

    Across the board, the inflation trade is en fuego. I’m not sure about that. Commodities usually break last, but they break hard.

    February 19, 2008 at 11:37 AM #155399
    HereWeGo
    Participant

    That would have been a fine trade in 2007, no doubt about it.

    Update:

    The 10-year is getting whacked today, the yield is at 3.9 and climbing. 30-year mortgage rates are higher today (5.82) than 1 year ago today (5.77,) according to Bloomberg.

    Across the board, the inflation trade is en fuego. I’m not sure about that. Commodities usually break last, but they break hard.

    February 19, 2008 at 11:37 AM #155407
    HereWeGo
    Participant

    That would have been a fine trade in 2007, no doubt about it.

    Update:

    The 10-year is getting whacked today, the yield is at 3.9 and climbing. 30-year mortgage rates are higher today (5.82) than 1 year ago today (5.77,) according to Bloomberg.

    Across the board, the inflation trade is en fuego. I’m not sure about that. Commodities usually break last, but they break hard.

    February 19, 2008 at 11:37 AM #155422
    HereWeGo
    Participant

    That would have been a fine trade in 2007, no doubt about it.

    Update:

    The 10-year is getting whacked today, the yield is at 3.9 and climbing. 30-year mortgage rates are higher today (5.82) than 1 year ago today (5.77,) according to Bloomberg.

    Across the board, the inflation trade is en fuego. I’m not sure about that. Commodities usually break last, but they break hard.

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