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The Bond Bubble Collapse Thread; Reset Time. This is the End of the Line for All the Rolling Bubbles Propped Up in the last 30 Years
Topic Started: 21 Aug 2016, 04:02 PM (11,432 Views)
Foxy
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Zero is coming...

createdby
19 Nov 2016, 11:12 AM
Just Wall Street getting that sweet commission. Since the price of money went to zero, funds go in and out of assets, whichever is the flavor of the month.

They then spend their commission on real assets: gold, real estate, art, hard currency.

This Trump boost is just another bubble to pile on. Another flavor of the month financial asset to bubble and pop.

The will keep doing this until the money runs dry (gets written off as bad debt in some counterparties' book).

We all know from the Japanese playbook that fiscal spending is as ineffective as monetary spending.

Japan, the industrial powerhouse, built roads, bridges, and airport to nowhere and only drove them deeper into deflation and deeper into debt (the highest in the world).

People may say demographics played a part, but that's also the Trump playbook. Anti-immigration policies will have the same effect on US demographics.

The end result of Trumponomics is an even higher debt to GDP.

Japan also had sporadic boosts in Nikkei in the last 20 years, only for it to pop in a downward trend. The US will be no different.

Hold on to hard assets: gold, silver, real estate, art, hard currency out of the banks IN SMALL DENOMINATIONS as we're learning (of anything above the government insured limit), directly owned shares in a trading account (not in indexes or ETFs) in solid companies.
Sounds like a plan,

I am sitting near a beach just chillin.

No rush to do anything.

I would like to keep reducing debt eventually to zero.

Then the dominos can fall anyway they like.
http://www.afr.com/content/dam/images/g/n/2/1/u/8/image.imgtype.afrArticleInline.620x0.png/1456285515560.png
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Jimbo
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b_b
13 Oct 2016, 12:44 PM
Demand roughly double the size of the issue - what a shock!!!

A lot of "money" chasing a (barely) positive yield.

You people just don't seem to get it it do you?

The days of turning the value of an hours expended labour into a retirement fund for life are over.

Work for 30 years, put a few bucks away every week, own a couple of IP's which you can then sell at double bubble for every decade since you bought them.

Your reasoning?

It worked in the past so it must continue to work forever.

The Elephant in the room is debt, but shit yeah, "debt doesn't matter".

Anyone on here own a pocket calculator?

Matthew, 30 Jan 2016, 09:21 AM Your simplistic view is so flawed it is not worth debating. The current oversupply will be swallowed in 12 months. By the time dumb shits like you realise this prices will already be :?: rising.
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createdby
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Just as the 30 year bond is the canary in the coalmine for Australian guv debt, and so is the 50 and 100 year for the US.
Remember kids, spend money like a drunken sailor now and let the kids a generation or two (or three) later pay for it.


http://blogs.wsj.com/moneybeat/2016/12/01/mnuchin-has-traders-dreaming-of-100-year-treasurys/
Mnuchin Has Traders Dreaming of 100-Year Treasurys
Posted Image
Steven Mnuchin PHOTO: EVAN VUCCI/ASSOCIATED PRESS
By BEN EISEN
Dec 1, 2016 1:38 pm ET


Investors can’t stop talking about Steven Mnuchin’s ultra-long bonds.

Researchers at Morgan Stanley, J.P. Morgan and Citigroup, among other market players, all considered the possibility of new super-long-term Treasurys after Donald Trump’s pick for U.S. Treasury secretary made a passing reference to the possibility of issuing debt that goes out as far as 50 or 100 years. If he wanted to move forward with such a plan, he could do so next year, some said.

In part anticipating the possibility of more supply of long-term debt, 30-year Treasury yields have jumped, indicating lower prices. They were up 0.11 percentage point Thursday at 3.128%, after rising 0.06 percentage point a day earlier.

The concept of lengthening debt maturities, discussed briefly by Mr. Mnuchin during a Wednesday television interview, is not a new one. European countries have adopted it with increasing frequency this year as many interest rates dropped to record lows, making the cost of long-term debt particularly cheap.

The U.S. has been more hesitant to move forward with such a plan. The Treasury Borrowing Advisory Committee, a group of banks, investment firms and hedge funds that meet each quarter with the Treasury Department, discussed issuance of longer-term Treasurys more than two years ago. While it’s come up since then, there have been no concrete plans.

That said, a new administration brings new opportunities, some say.

“If the incoming Treasury Secretary and the new debt management team under him want to put their stamp on debt management policy early in the new Administration, they could announce the debut of 50- or 100-year bonds as early as the February quarterly refunding announcement,” said Ted Wieseman, an economist at Morgan Stanley, in a Wednesday research note.

Morgan Stanley’s long-term debt traders think such bonds would be well received by investors, he added. In fact, the high demand mixed with the trading dynamics of debt 50- or 100-year debt could mean the securities change hands at yields that are lower than 30-year bonds.

Others don’t see the new securities coming quite that quickly, even if the Treasury Department begins exploring the topic in February. J.P. Morgan strategists, led by Jay Barry, said in a Wednesday note that when the Treasury reintroduced 30-year bonds a decade ago, they began discussing the topic in May 2005, but didn’t end up doing the first auction until the following February.

“We would not expect the first auction to take place before August, and it could take substantially longer than that,” they wrote.
Edited by createdby, 2 Dec 2016, 08:38 AM.
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https://www.bloomberg.com/news/articles/2016-12-01/global-bonds-suffer-worst-ever-meltdown-as-bull-market-shows-age

Global Bonds Suffer Worst Monthly Meltdown as $1.7 Trillion Lost
by Garfield Clinton Reynolds and Anooja Debnath
November 30, 2016 — 10:16 PM EST
December 1, 2016 — 4:05 PM EST


Index’s market value fell $2.8 trillion over past two months
U.S. 10-year yields saw biggest jump since 2009 in November

The 30-year-old bull market in bonds looks to be ending with a bang.

The Bloomberg Barclays Global Aggregate Total Return Index lost 4 percent in November, the deepest slump since the gauge’s inception in 1990. Treasuries extended declines Thursday along with European bonds on speculation that the European Central Bank will consider sending a signal that stimulus will eventually end. The reflation trade has been driving markets since Donald Trump’s election victory due to his promises of tax cuts and $1 trillion in infrastructure spending.

Posted Image

Calling an end to the three-decade bond bull market is no longer looking like a fool’s errand: the Federal Reserve is expected to raise interest rates again -- and do so more often than once a year, inflationary expectations are climbing and there are hints global central banks may buy less sovereign debt going forward. Investors pulled $10.7 billion from U.S. bond funds in the two weeks after Trump’s victory, the biggest exodus since 2013’s “taper tantrum,” while American stock indexes jumped to records.

“The market has moved with remarkable swiftness to price in the anticipated reflationary impact of a Trump administration,” said Matthew Cairns, a strategist at Rabobank International in London. “This has, in turn, prompted a notable rotation out of fixed income and into equities.”

Still, Cairns cautioned the moves are “remarkable given the distinct lack of clarity as regards what policies the president-elect will actually pursue.”

November’s rout wiped a record $1.7 trillion from the global index’s value in a month that saw world equity markets’ capitalization climb $635 billion.

The yield on 10-year U.S. notes rose 56 basis points in November, the biggest jump since 2009, and was at 2.44 percent as of about 4 p.m. in New York, after reaching the highest since June 2015.

The average yield on the Bloomberg Barclays Global gauge climbed to 1.61 percent on Nov. 23, after touching a record low of 1.07 percent on July 5.

“A lot of people are beginning to think that it is the end of the bull rally,” said Roger Bridges, chief global strategist for interest rates and currencies in Sydney at Nikko Asset Management’s Australia unit, which oversees $14 billion. U.S. 10-year yields may rise to 2.7 percent in January, Bridges said.

Read More: Few bond investors are seeing an end to the rout

The rise in yields shows the limitations of the quantitative easing policies at the biggest central banks, Bridges said. Bonds will be especially vulnerable if the European Central Bank discusses reducing its debt-purchase program at its Dec. 8 meeting, he said.

The yield on German 10-year bunds climbed nine basis points to 0.37 percent Thursday.
Edited by createdby, 2 Dec 2016, 11:58 AM.
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Aussie AAA bonds and Mid-Year Economic and Fiscal Outlook:
Posted Image

http://www.afr.com/markets/bond-market-selloff-upgrades-cost-of-borrowing-in-myefo-20161219-gte3c4
Bond market sell-off upgrades cost of borrowing in MYEFO
Dec 19 2016 at 6:10 PM Updated Dec 19 2016 at 7:02 PM
by Vesna Poljak

Posted Image
Treasurer Scott Morrison says demand for Australian debt is well supported. Ben Rushton

Bond fund managers agree the government's steeper yield curve projections only underscore the importance of regaining control of budget spending at a time when Australia retains its premium rating and funding is cheap.

The MYEFO update released on Monday shows the average cost of borrowing by the Commonwealth has risen to 2.7 per cent from an estimate of 2.5 per cent just before the election. The yield curve is also higher and steeper, reflecting the bond market's sell off which accelerated in November. And for the first time, the Australian curve goes out to 30 years following the issue of 2047 bonds in October.

James Alexander, co-head of global fixed income at Nikko Asset Management, said that foreign investors look to Australian bonds for high yield, high credit quality and stable government and "none of that has changed". But conditions have, and any downgrade would come at a time when investors are feeling less at ease than they were just six months ago.

"In this environment where we've seen quite a turn in sentiment towards government bond markets around the world, that environment is one where you would prefer not to get downgraded," Mr Alexander said. "In the stable conditions of six to 12 months ago, nobody would take much notice."

Posted Image
Foreign ownership of Australian bonds has fallen.

Ratings agencies indicated they are losing patience with the Coalition's strategy to chart a path back to surplus, paving the way for a downgrade to a double-A designation from triple-A next year.

57 per cent foreign owned


Foreign investors own 57 per cent of Australia's bonds, a figure that has been steadily falling since 2012. Lately, Japanese investors have preferred US and European debt. TD Securities speculates that the banks have picked up the slack.

Treasurer Scott Morrison said international investors still showed strong interest in Australian debt, including the 30-year bond which was sold with a 3.27 per cent coupon, but that could be challenged if the rating is lost.

"In our most recent issuances, we are getting three to four times coverage on our debt and if you look at the movement in yields of Australian treasury bonds versus US treasury bonds, you see a bit of a narrowing of the gap which means we are getting better prices," Mr Morrison said.

"How long that is lived, we will see, but the point is that when those who actually make the purchases on Australia's debt – hedge funds, sovereign wealth funds, the central banks of other countries and others – when they are making their own independent assessments of Australia, they are buying."

Katrina King, head of fixed-income research at QIC, sees the yield differential between the US and Australia compressing, but that is largely a factor of the better economic outlook in the US. "You've had US bonds move higher and faster than the Australian bonds, that's more about economic outlook and the inflation outlook which is higher in the US than Australia." The pick-up in inflation momentum has been helped by the expectations for expanded fiscal spending under Donald Trump which is not an option for the Coalition.

Underlying problems

MYEFO's projections are not helped by the underlying problems within the Australian economy such as poor wage growth which makes US assets look more attractive, said Chris Dickman, senior portfolio manager at Altius Asset Management, given expectations of US dollar strength.

"Wages growth is fairly anaemic," he said, decreasing or flat in real terms while business investment is subdued. "Increased revenues from higher commodity prices don't really find its way meaningfully to the middle class. They get trapped to the extent that company profits are distributed to share owners, with little trickle down benefit, and within the superannuation system," he said.

Mr Alexander doubted whether the loss of the AAA rating would be "hugely" material should it happen, however that doesn't make it a welcome development. Australia "has this external debt position it needs to fund, which puts it in this position – it does need to be a strong credit quality to attract those funds. Is it better to be triple A? Sure it is."

Mr Alexander also believed Mr Morrison was serious about balancing the budget. "When you're running the deficit it needs to be funded, clearly in calm normal conditions you wouldn't expect Australia to have any trouble at all with it but things change and risk appetite can fall pretty rapidly around the world."

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