10 year rate creeps up - how long before they increase QE?

They'll let it creep up until the next FOMC meeting and when they reveal that there not tapering it will retreat a little bit while keeping the markets on the hook by suggesting tapering in the months ahead. Each time the 10 year bond retreats it doesn't retreat as much as the previous time. I give it to about March/April at most. If they don't start tapering by then the market will have enough of the Fed crying wolf.
 
The problem is that 45 Billion/month is not enough to mop up all new bonds and maturing bonds that come to market so interest rates have to move up when sellers outnumber buyers. The price of the 10 year note fell 8% these past few days. Bond holders are getting nervous.... The market fell for the taper ploy in September - I don't think it is going to happen again. If we approach 3% again (not far from 2.8) before the December FOMC meeting they will have to do something and "No Taper" is not going to work again ? In my opinion....
 
Ronnie
I've given up on this Fed numpty sideshow toss
Sitting back now, popcorn ready
Next clown comment please!
 
Alfie
Time will tell mate!
We are all sitting back and watching this clown act.
Cheers
 
Ronnie 666 said:
10 year rate at almost 2.8% as bonds tank. There is no question that the Fed have lost control of the bond market.

http://www.marketwatch.com/investin...=50&lf=1&lf2=4&lf3=0&type=2&size=2&style=1013

The question is can they hold out to January before increasing QE or will it happen in December?,
Once QE is increased all talk of "taper" will die. Perhaps then gold will gain some lustre ?
Click to expand...

Why would it the bull market in the stock market will just charge up harder.

I dont think gold will do much.
 
The point is the 10year bond is reflecting the risk of u.s. bonds and the government may have no option but to go to 2 year bonds instead of very short bonds. They are getting to the point that nobody will buy the short stuff.......q.e. will not be used to buy everything because the Chinese will not allow this because it will value all their u.s. bonds as worthless.....so be prepared for the slow but sure media campaign to show the virtues of a rising interest rate. The Chinese have the u.s. government by the short and curlies and an interest rate rise in imminent. As for tapering, it is a foregone conclusion. For the Fed will not keep buying bonds with interest rates rising because the value of these bonds will plummet. It is foolish to think that the Fed have control....they have no control and are in reaction mode. They, however, are not stupid and they know what is coming.
 
tolly_67 said:
The point is the 10year bond is reflecting the risk of u.s. bonds and the government may have no option but to go to 2 year bonds instead of very short bonds. They are getting to the point that nobody will buy the short stuff.......q.e. will not be used to buy everything because the Chinese will not allow this because it will value all their u.s. bonds as worthless.....so be prepared for the slow but sure media campaign to show the virtues of a rising interest rate. The Chinese have the u.s. government by the short and curlies and an interest rate rise in imminent. As for tapering, it is a foregone conclusion. For the Fed will not keep buying bonds with interest rates rising because the value of these bonds will plummet. It is foolish to think that the Fed have control....they have no control and are in reaction mode. They, however, are not stupid and they know what is coming.
Click to expand...

How can the Fed allow interest rates to rise when the US owes $17.3 T. A couple of % rise and the US is over, done, finished, kaput. No way they do that they would rather print and print to buy up all the bonds (Zimbabwe solution) and destroy the $. Screwed whichever way you look at it.
 
You underestimate the leverage of the biggest bond holder....China....the Fed are not in control as you would like to believe.

They are approaching the point that nobody will risk buying the short term bonds because of the risk of a bond default which will occur at one of the continuing debt limit showdowns. The shortest bonds are at the highest risk and as such it would be near impossible to buy CDS to offset the risk.

The government are aware of this and China will have made it clear to them also......a credit default would rule out any more short term bond issue as there would be no-one left to buy them but themselves.....this would cause the bond market to collapse and take the Chinese investment down with it.....this is not going to happen.

To avoid this, they will strike first and issue longer dated bonds. The interest rate cycle is turning.....after many, many years.....it has to happen. Manipulation succeeded in the short term as any manipulation will but it cannot stop the inevitable. The wheel is turning once more.
 
^^^ no the Fed is the biggest bond holder not China. If the Fed does not increase QE over the next 2-3 months ( or sooner) we are heading into a massive deflationary depression. No chance they will let that happen.

The Fed became the largest holder in Feb 2011. This has grown massively since then.

http://www.ft.com/cms/s/0/120372fc-2e48-11e0-8733-00144feabdc0.html#axzz2kTAy3kiY

They keep misleading you by saying China is the largest foreign holder - FOREIGN ......

I heard that as of a few months ago the Fed owned more bonds than China and Japan combined.......lol
 
The largest holders of US debt are the US "intragovernmental holdings" which hold about $4.5trillion, of these Social Security (Federal Old-Age and Survivors Insurance Trust Fund) holds about $2.4 trillion, as ronnie pointed out, China (the largest foreign holder of debt) is at about $1.3trillion. To help keep that amount in perspective, the Fed holds about $1.9trillion.

http://useconomy.about.com/gi/o.htm...11/03/25/what-are-intragovernmental-holdings/

Now of course at some point the social security pension fund will have to call in that $2.4trillion in debt and the US gov will either have to find the money from somewhere or it will have to default on those bonds - effectively defaulting (and you could argue defrauding) it's own citizens.
 
In reality, the majority bond holders that hold more than the Chinese is actually themselves......it is like owing yourself 4 trillion....you can kid yourself a lot easier than what you can the loan sharks that you are relying upon.
 
Yes this is what Robert Mugabe did in Zimbabwe, the world banks and governments ridiculed his actions as irresponsible and foolhardy. When they do it, its sound economics.... Pull the other one. I agree the end is the same.
 
tolly_67 said:
The point is the 10year bond is reflecting the risk of u.s. bonds and the government may have no option but to go to 2 year bonds instead of very short bonds. They are getting to the point that nobody will buy the short stuff.......q.e. will not be used to buy everything because the Chinese will not allow this because it will value all their u.s. bonds as worthless.....so be prepared for the slow but sure media campaign to show the virtues of a rising interest rate. The Chinese have the u.s. government by the short and curlies and an interest rate rise in imminent. As for tapering, it is a foregone conclusion. For the Fed will not keep buying bonds with interest rates rising because the value of these bonds will plummet. It is foolish to think that the Fed have control....they have no control and are in reaction mode. They, however, are not stupid and they know what is coming.
Click to expand...


What do you mean by this?

QE increases the price of bonds.

Do you mean it willeventually reduce the value of the USD to the point that the bonds become worthless?
 
q.e. will decrease the price of the bonds as it will raise the yield. Under normal circumstances, q.e. will create inflation and a falling currency but due to the fact that at the moment in the u.s. deflation is occuring at a rate quicker than inflation, this is offsetting the impact. The more q.e. , the higher the yield that will be expected from external bond purchasers to offset any currency exchange losses. If nobody has any faith in the dollar or the u.s. government, then there is no-one to sell the bonds to except themselves. This will create a feedback loop and the dollar is toast.

The short term bonds have been used to force down interest rates but that will soon end. The shutdown of government will eventually create a situation where a short term bond failure is likely. The government will have been advised internally and externally ( Chinese ) that this is to be avoided at all costs. Moving to longer dated bonds will alleviate this problem for a while but the trade off will be higher interest rates.

It is all about confidence in the system.
 
tolly_67 said:
q.e. will decrease the price of the bonds as it will raise the yield. Under normal circumstances, q.e. will create inflation and a falling currency but due to the fact that at the moment in the u.s. deflation is occuring at a rate quicker than inflation, this is offsetting the impact. The more q.e. , the higher the yield that will be expected from external bond purchasers to offset any currency exchange losses. If nobody has any faith in the dollar or the u.s. government, then there is no-one to sell the bonds to except themselves. This will create a feedback loop and the dollar is toast.

The short term bonds have been used to force down interest rates but that will soon end. The shutdown of government will eventually create a situation where a short term bond failure is likely. The government will have been advised internally and externally ( Chinese ) that this is to be avoided at all costs. Moving to longer dated bonds will alleviate this problem for a while but the trade off will be higher interest rates.

It is all about confidence in the system.
Click to expand...

In other words, you believe the increase in demand for US Bonds (due to QE) is offset (or will be) by the decrease in foreign demand for US Bonds due to inflation concerns and lower yield?
 
If the U.S. is the sole buyer of u.s. bonds....whichever form it may be...q.E., pension funds.....it means that the rest of the world is losing its faith in the ability of the u.s. to keep its economy, currency etc under control......this creates risk......risk is one of the major factors that influence the level interest rates.....bond yield is simply interest rate.....
 
You must log in or register to reply here.
Back
Top