10 July 2007

Bond Apocalypse Averted - For Now

Well my picture perfect 10yr t-note trade with all its bearish connotations has been scuppered over the last to sessions by none other than, err... the bears.

NEW YORK, July 10 (Reuters) - U.S. Treasuries rallied on Tuesday as investors poured out of stocks and speculative bonds for the relative safety of U.S. government securities.

The drive to Treasuries was fed by mounting concern over subprime mortgage debt and the deteriorating housing market that could also hurt U.S stocks, analysts and trader said.

Earnings warnings from retailers and home builders and also credit rating agency Standard & Poor's statement that it may cut ratings of some subprime loans and is reviewing its ratings of collateralized debt obligations were all factors hurting equities and nongovernment bonds.

"It has to do with the S&P headline on subprime. Credit spreads are blowing out. The fear is that they will force selling by those investors who can't hold on to these low investment-grade bonds," said Carl Lantz, U.S. interest rate strategist at Credit Suisse in New York. >>MORE<<

Interestingly, the technically sloppy short setup on the EuroBund has turned up a better looking long trade from a nice double bottom. A long case good certainly be made for the US contract as well, perhaps more so... but I was short. :-P

What has actually happened is that my bond apocalypse has turned into a USD apocalypse, with basically the same reasons quoted; sub-prime/housing slowdown blah blah. This has caused quite some technical damage to the USD index with new lows printed.

For the bulls it really is head in the sand time (if they want to stay bulls). In my humble and ill-educated opinion, the anglo economies are fucked, and are living on borrowed time (and whacking great piles of borrowed money). It will just take a bit of time for muppets to realize this fact.

The precise route by which this financial apocalypse plays out though, is anyones guess.

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