« More staples needed, Fri., Sept. 22, 2006, 3:25 PM | Main | Toronto Resource Investment Conference, Fri., Sept. 22, 2006, 6:18 PM »
September 22, 2006
A rush to safety, Fri., Sept. 22, 2006, 3:58 PM
Just as I was thinking that maybe bond yields would rally a little more so the yield on the 10-year U.S. Treasury Note would continue to move into the 4.90-4.95 pct range, bonds shot higher and the yields collapsed.
Are bonds strengthening here because the economy is weakening so quickly or because capital is fleeing equities or because hedge funds are feeling the heat of the evil eye-ball (ie, wary clients)?
Whatever it is, I feel it is a rush to safety " not because the rewards are going to be so high, but because the risks are not so high.
All of this bond action started at 1:00pm ET on Monday.
At exactly 1:00pm ET Monday the National Association of Home Builders produced their housing market index, and the Treasury auction of 3-month and 6-month T-Bills closed.
As Econoday reported: "The NAHB housing market index extended its deep plunge, down for an eighth straight month to 30 in September vs. 33 in August. The index, at a 15-year low, was at 65 in September last year."
Does this not translate into fear of a housing market crash?
And if the Fed does not drop rates hard and fast, does this not also smell like a crash coming in the equity market?
How can the market accept a 10-year Treasury yield at 4.59 pct and a Fed Rate of 5.25 pct?
Answer: it can't! How long will it be before everybody is looking for protection?
Who knows what's next after these hedge funds are discovered to be not so well hedged?
The first bombs have been dropped. More to come.
Posted by Posted by Bill Cara on September 22, 2006 03:58:16 PM | Category:
Discourse
Bill,
How or where does one find what Hedge Funds are buying or selling?
Someone told me awhile ago, that if you can see where they are heading, get there ASAP, and the same is true on what they are dumping.
John
Mr. Cara,
Looking at the yield curve, the bond market appears to be pricing in one or more Federal Funds Rate cuts in the near-term to address economic weakness, and ignoring any possibility of rising consumer/producer price inflation rate statistics in the intermediate to long-term. Why?
Does bond traders really think that the Federal Reserve is more likely to permit price statistics that indicate deflation than inflation?
With best regards.
Suresh
Posted by: incometrap ![[TypeKey Profile Page]](http://www.billcara.com/nav-commenters.gif)
at
September 25, 2006 6:50 AM [link]
Good comment -- Things do not feel right for the equity market.
Global growth indicators continue to point down as reported by BCA last week.
Hedge funds have been forced to try to live to the expectation of "high return", just by taking more risk and I suspect that as you imply more noise to come.
Specially vulnerable in my opinion are emerging markets and financials.
Posted by: JP![[TypeKey Profile Page]](http://www.billcara.com/nav-commenters.gif)
at
September 22, 2006 4:40 PM [link]