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The US Government debt market will not implode until AFTER Europe, the UK and Japan are completely reduced to rubble (ala Greece). US goes down last. Until then bond rates will remain very low, on a flight to safety and deflation play.

Absolutely correct. And yet, no matter how many times you say it Fraudster, a lot of people are still going to disagree with you and lose their shirts shorting TLT/buying TBT. It happened in '08 and I am sure it will happen again.

Don't think I could of possibly chosen a worse day to short the 30Y,utterly buried...14872.4 nightmare

1 poxy point above my stop, would you Adam and Eve that!

I don't daytrade synthetic manipulated ETFs. Picking the day when a "hedge" strategy impodes isn't where I'm coming from.

I'm talking about managing fixed income portfolios. Sorry if I wasn't clear on that.

Bond markets move in LONG cycles. By long, I mean one to three DECADE long cycles. (I like to say they're sort of like jazz to the stock market's rock and roll.)

Folks who are buying bond funds right now, with a very few exceptions, are going to be seeing a material loss of principal sometime between next week and a couple years from now, IMO.

/nanna /you /forgot /the /not /investment /advice /thing.


... and for the rest of the thread, when the dominoes start falling, they fall in sequence rather quickly.

My dear, it wasn't investment advice, just cocktail hour musings.

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Also,the notion that the Fed's stated policy (rather than market forces) will prevail at the turn ... I don't think so!

IMHCO, holding interest rates artificially low will come to be seen as the most stupendously stupid economic policy in the history of the world. Ben.

*looks at title of thread*

*looks at 1.7% print today*

*shakes head*

When this moves back up, the USA budget will detonate almost overnight.

Housing will go from the current robust recovery (/sarc) of 400,000 new starts, to something apocalyptic like 100,000 starts. Everyone's house will drop another 20% or more, and worst of all the interest service on the debt/deficit will go from $300bn to $1,000bn as most paper is very short duration and constantly rolled on the short end. 1.7% to 5 or 6% and the entire thing blows up.

What could go wrong?

This drop, and at this point I assume everyone here at TF knows this, is due to Europe fleeing to safety and buying up US T's along with Benny monetising.

Ben, the question is, how long before they go up? Seems to me, .gov will do everything in its power (quietly) to let everyone else go to hell, to keep the cash flow into treasuries, no?

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Everyone's house will drop another 20% or more

Pull the other one Ben. All bubble retrace (overshoot) their pre-bubble levels in real estate (1990s). We are looking at another 50% decline, or more, from here (if the 10 year goes from 1.7% to about 5-6% that should be enough). Housing has a ways to go. I would be surprised if housing starts basically come to a general halt at the worst of it.

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worst of all the interest service on the debt/deficit will go from $300bn to $1,000bn as most paper is very short duration and constantly rolled on the short end. 1.7% to 5 or 6% and the entire thing blows up.

The blended rate is about 2-3%, so 5 or 6% is entirely doable. But that is probably conservative, because, if we get bond market stress it is likely to exceed the average of the last 30 years or so (which was the beginning of the debt bubble). I would not be shocked to see the Fed Funds rate back at 1979-1981 levels. At that point you can forget it, housing is going to retrace back to the early 80s and we are looking at another 75% or more drop in prices. Imagine what GDP will look like under either scenario.....

Houses in NJ are still over $225k which with an average $7k property tax bill is in the stratosphere. I would say houses in much of the northeast can easily drop 50 percent or more.

we looked at BEACHFRONT houses in Puerto Penasco Mexico 299K cost and 400/year taxes. Of course you cant "legally" have guns there. But maybe no guns is better than being raped each year "legally" via taxes in the US.

IMO, houses in South Florida still have a ways to go too. San Francisco, San Diego and Los Angeles still have a LONG way to go. DC is primed to CRASH AND BURN! The National Housing market still has a long way to retrace the entire bubble increase.

Yeh South Florida property taxes are in the range of about $1K a month on a $600K home. I know Florida has no income taxes but

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worst of all the interest service on the debt/deficit will go from $300bn to $1,000bn as most paper is very short duration and constantly rolled on the short end. 1.7% to 5 or 6% and the entire thing blows up.

Current payment is about $230Bn.

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The blended rate is about 2-3%, so 5 or 6% is entirely doable. But that is probably conservative

...and a clean double or triple is likely. More than that, well...won't matter.

So more accurately we could see Line Item Interest of $460Bn to $690Bn, and that's on the low end.

Another $230Bn to $460Bn will just push the pedal into the floorboards a bit harder.

The .TNX closed at 1.702% for the second day running.

Is anyone looking for lottery numbers? :)

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1.0 percent is only half the yield of the current level. Those of you predicting it are making a BOLD BOLD claim. I for one say sold to you.

I don't know if we will quite get there, but I think we'll get close. And the chart says it *could* go there. TNX is at 2008 panic levels - but we haven't even started a proper panic yet. The JGB is just off the 2003 lows - 0.84%. Who woulda thunk? I agree with Nanna - now's not the best time to jump aboard, but I've been on board for 2.5yrs and plan to ride it some more - what's the alternative?

The alternative is gradually reducing exposure and moving to cash, taking the profit on the existing bonds as paying the interest forward.

For those who don't have an existing portfolio to adjust, it's time to be patient, and stay in cash.

N/JMO, not investment advice

Banks are borrowing from the Fed at effectively a negative interest rate.

You would think four years of this would have put the banks in a pretty good position in capital reserves.

It indeed has. The problem is, the banksters are not and have never been happy with with regulations limiting
their ability to gamble...with other people's money ie. depositors.

This is insane...

Why should our FDIC insure speculative bets by the likes of Jamie Dimon or any other rogue bankster?

Where is Glass Steagall...or something even better?

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The alternative is gradually reducing exposure and moving to cash

IMO, possible bank failures and limited FDIC insurance makes cash risky. I like 4 week t-bills. For large amounts of money I really like Zero-Percent Certificate of Indebtedness, if I think I may need to make a move in a matter of weeks.

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IMO, possible bank failures and limited FDIC insurance makes cash risky.

If the FDIC does not make good its game over and the reset is here.

Buy a safe. A big, heavy fire safe. Or if you're like me buy several and sprinkle them around.

The reset comes when interest payments hit 8% of GDP. That's the point at which hyperinflation will start because that much money cannot be properly reinvested in the economy and will start flooding out of dollars into hard assets. This raising rates without a massive devaluation or default to decrease nominal debt would be game over.