4th Time a Charm for the Long Bond?

Mish

For the 4th time the long bond yield dropped below 2.0%. Will this one last?

Treasury Curve Details

  1. There is now a solid wall of inversions. Every Treasury Note and bill from three-year down is inverted with the next lower duration except for the Fed Funds Rate.
  2. The 10-year yield is inverted with 6-month and shorter durations.
  3. The 30-year long bond dipped below 2.0% for the fourth time and is just 6 basis points from a record low.

The same thing happened on January 31.

At that time I discussed My Conversation With the 30-Year Long Bond.

My Conversation With Mr. Bond

Hello Mr. Bond. You just cannot seem to stay away from 2.0%.

We missed you. Welcome back. Will this be a longer visit? Are you calling for a recession?

Unfortunately, Mr. Bond did not answer. He just winked.

Today, I asked Mr. Bond the same questions.

Once again, he did not answer directly.

Instead, he just shrugged his shoulders and responded with three questions of his own:

  1. Did you notice Half the Population of China, 760 Million, Now Locked Down?
  2. Is Japan Headed for Recession, or In Recession?
  3. Do you really believe the US can avoid a recession?

With that, Mr. Bond said: I have to run, but here's another question for you to think about: If not now, when?

On his way out the door I thought I heard him singing Do It To Me One More Time by Captain and Tennille, but it might have been Tonight's the Night.

Mike "Mish" Shedlock

Comments (25)
Sechel
Sechel

Hard to see why we everyone is so bullish on equities and corporate earnings when the bond yield is at 2% Either bonds are right or stocks are right, both cannot be.

No. 1-10
KidHorn
KidHorn

Seems the market is expecting QE to be a permanent part of our monetary policy. Not just in the US. All the major central banks.

Realist
Realist

I don’t worry much about these things because I always have a balanced and well diversified portfolio. I get the impression that many people here try to “time the market” or “bet big on one or two things like gold and cash”. Then I see these people hoping or wishing for a market crash or recession in order to justify their investment position.

The majority of my investments are in “productive” assets. In other words, assets that produce goods, services, and jobs.

Though I have a small position in gold, I consider it mostly a waste of resources. Same goes for “collectibles” like art, baseball cards, beanie babies, etc.

Kid horn: I do expect QE forever, low and lower interest rates, skyrocketing deficits etc because that is what “the powers that be” will keep doing. Not because they should. But simply because they will. That’s reality.

Tony Bennett
Tony Bennett

Long Bond = Old Man River

Going to go where it wants (yield < 1%) in due time.

121263
121263

The way this old bond trader who started trading bonds on Wall St in 1981 and still trades for himself sees it new all time low yields. You have supply chains shredding with nonlinear second and third order
effects. You have Japan in recession,Germany and who knows China.
Latin America a disaster. Corona virus spreading ,believe the scientists, Weak retail sales, over leveraged corporations
collapsing shipping and intermodal volumes manufacturing in recession. What’s not to like?

121263
121263

The old bond trader forgot one other very important point. Credit demand has been to keep zombie Corp alive. No real capex demand.
Fed can push on a string all it wants but it won’t help demand much.

abend237-04
abend237-04

I'm beginning to think I may understand why Guy Clark didn't like his landlord:

Could be, he was Mr. Bond.

AWC
AWC

FF- 30 yr,,,,reward free risk premium at 39 BP’s? Better to buy toilet paper forward, or even pre 65 quarters.

Especially considering the only way out for the Fed now is fiscal. Major fiscal. Tsunami fiscal. MMT fiscal. Like, Bernank chopper fiscal. War fiscal.

William Janes
William Janes

This blog never fails to accouter to Apocalyptic forecasts. Reminds of when that Hedgeye Blog flogged the stock, KMI, and said to get out before the company went bankrupt. Didn't happen.


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