Cramer today said that China is indeed selling hundreds of billions of US Treasuries. But this should depress the dollar (it did yesterday, but not today). But the Chinese, Japanese, European sure popped rates--nice move in TBT. Apparently the chinese yuan is so weak that the Chinese concluded that selling the USTs wouldn't hurt the exchange rate that much.
I believe the last three Fed. heads knew what they were doing , especially Bernanke and Yellen.
Despite the incessant clarion calls by the deflationists that the dominant macro trade: long US dollar, long Treasuries and short oil - will extend indefinitely; the bend in the road in Q1 and the familiar patterned streetscapes, continue to point towards an approaching U-turn in this one-way street.
Only I rank amateur would use TBT for anything but a 1-3 day swing trade instead of using the Financial Futures exchange.
It may not make sense to you, and that makes sense if you're truly confident in your personal forecast for future inflation. But for the past 140 years, the yield on 30Y treasurys has averaged 210 basis points over the current rate of inflation. It doesn't matter if doesn't make sense to your personal situation - this is the correlation over time and it is as predictable over longer time periods (time spans of at least 12 months) as the tides...
Generally speaking, 15Y conventional loans are tied to 10Y treasury rates; 30Y conventional loans are tied to 30Y treasurys. ARMs are typically tied to something like LIBOR
The taper tantrum in 2013 was misplaced and an excellent buying opportunity (I know because I was loading up on 30Y bonds the entire time). When the Fed actually began the taper in early 2014, yields began to drop. When QE3 was fully completed in October of 2014, long-term yields proceeded to drop another 100 basis points (just like rates dropped after QE1 and QE2).
It does not make sense that long term rates are only dependent on the current rate of inflation.
I could see the short term rates being dependent on the current rate of inflation but not long term rates.
Long term rates should be based on the average rate of inflation over the same period of time that the bond period is.
Leveraged ETF's always decay when the underlying instrument returns to the same level. Suppose the market as a whole went up 10% in one day. A 2x bull ETF goes up 20%, say from 100 to 120. Now if the market goes back down 9.09% in one day, it would return to the previous level. The 2x leveraged ETF would go down 18.18% from 120 back down to about 98.18. Smaller moves cause less decay, but these do decay over time usually.
It works precisely the opposite of the way you think it does, genius. This morning Stanley Fischer implied that there would be no September hike (and he and Yellen are the only Fed voices that matter). Yields promptly rose because, as Jeff Gundlach has repeatedly said, the long bond actually wants the Fed to raise short-term rates (because it reduces inflation expectations, the only thing the long bond cares about). Yields were dropping in recent weeks because bond investors were starting to believe the Fed's nonsense about a September rate hike. As long as YoY inflation stays around 0%, though, long-term rates should resume their slow death spiral downwards...
The Fed has indicated they will raise rates soon....yet wall street does not believe it....its unfathomable to them that the party will end......but it will end....the fed will raise rates just as they have been warning......does not matter how many times they ring the warning bell and tell you to get to higher ground.........heed the warning!!!