Curly’s Treasure

Interesting day today and the only thought I wanted to follow up on is something I briefly touched upon in my intra-day updates:

For you noobs – the TNX is yield of the 10-year treasury note (ZN) – and as such it runs inverse:

So, what’s interesting is that the yields shot up like a greased lightning bolt despite the fact that the Treasury was buying bonds today. The 10 year treasuries are really where rubber hits the road and Curly over at the Fed desperately wants to keep it at around 3%. Obviously, this doesn’t seem to be working out so well.

What I also find intriguing is the obvious trendline we seem to riding up on (or sliding down from the perspective of the futures). This is something to keep an eye on as it might provide great opportunities for short/long lays. I don’t see a clear upside border on the TNX – there seems to be however a nicely established downside channel on the ZN futures chart.

As with the previous channel down – it’ll work until Curly decides to mock with it again. But until that happens I see some nice swing trading opportunities.

On a more general note – bond traders are usually a lot smarter and sophisticated than their equity slinging cousins. So, why are they getting nervous? (Yes rats – that is a rhetorical question). And what will happen if the yields start working their way up to 3.5% and perhaps even breach 4% as they did during the 2008 credit market dislocation? Your guess is as good as mine but one thing is assured – what follows won’t be pretty for equity investors.

So to all the trolls you started showing up here lately: Better enjoy your little rally while it lasts. Because when the tide turns and Curly decides to take more drastic action on the treasury side to push those yields down, the ensuing slide in equities could be long and violent (don’t start Anna). Unless of course Ben decides to churn those printing machines – in which case we’re all fucked – bulls and bears alike.

Nyuk nyuk nyuk…