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Treasury Bonds
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INTEREST RATE MADNESS - Breaking down why defensive stocks are getting toasted (feat. charts on TLT/SPY, Utilities as a ... rising real rates, and much much more)

The Breakdown is BACK! @Nick Correa and I decided we couldn't let Ash and Weston have all the fun 😀  so we took a chart-heavy deep-dive into my interview with Teddy Vallee.

We explore WHY rising interest rates are clobbering not just growthy tech stocks, but other sectors as well - sectors you wouldn't typically think of. 

Lastly we attempt to redefine the mind-boggling question - what IS reflation? Is it inflation that the bond vigilantes fear - or is it that GROWTH is attracting their capital elsewhere?


 

https://vimeo.com/519722095/4f44f76160

 

@thomas cullis @Theodore Boydston @Jaymes Rosenthal @Matt Daniell @Jeff Dafoe @Sam Colt @Sean Morgan @John Ahearn @Craig P @Jeremiah S @Moritz Heiden @Bradley Snyder @Ernesto Rachitoff @Jason Higa @Hem Desai @Muddshir Hussain @Nivtej Dhaliwal @John Crockett @Lisa Gee @Ben O'Hare @Aleix Selles @Carlos Licea @Wilbert Weigend 

 

Inflation story doesn’t make sense to me

Point by point.

  1.  The short end of the curve minus the 5 year break even rate is at all time lows.  The 2 year minus 5 year break even is at -2.3% and the 2 year rate is at or below most of the rate it was at from October-December, and this is basically true of everything shorter than the 2 year.
  2. We are expected to get large base effect numbers this year.  A large base effect rate has more of an impact for the 1 and 2 year range than the 5 year range since it would be a larger percentage.  Instead of increasing short term yields we have flat to decreasing short term yields and rising yields on the 3+ year treasuries.  
  3. There is a decoupling between the 5 year break even rate and the TIP etf since mid-late January.  
  4. There has been a large decoupling between the 5 year forward inflation expectations rate and the 5 year break even rate.  The forward expectations rate had been higher than the break even rate going back to 2008, but expectations minus breakeven has been rising and in mid January broke 0 for the first time since 2008 and is now at +0.46, an all time high with data going back to 2004.  

None of this adds up to a story of ‘reopening, growth and inflation’. 

Why 17% short interest in TLT against upcoming Fed buys?

Why is there 17% short interest in TLT (20+ yr treasuries) when everyone knows the Fed will buy 30 yr treasury bonds if yields go any higher. Where's the profit potential for those shorts with certainty on the fed pushing bond prices up?? It makes no sense.