Best of the Week
Most Popular
1. Dollargeddon - Gold Price to Soar Above $6,000 - P_Radomski_CFA
2.Is Gold Price On Verge Of A Bottom, See For Yourself - Chris_Vermeulen
3.Dow Stock Market Trend Forecast 2018 - Nadeem_Walayat
4.Gold Price to Plunge Below $1000 - Key Factors for Gold & Silver Investors - P_Radomski_CFA
5.Why The Uranium Price Must Go Up - Richard_Mills
6.Dow Stock Market Trend Forecast 2018 - Video - Nadeem_Walayat
7.Jim Rogers on Gold, Silver, Bitcoin and Blockchain’s “Spectacular Future” - GoldCore
8.More Signs That the Stock Market Will Rally Until 2019 - Troy_Bombardia
9.It's Time for A New Economic Strategy in Turkey - Steve_H_Hanke
10.Fiat Currency Inflation, And Collapse Insurance - Raymond_Matison
Last 7 days
Golden Sunsets in the Land of U.S. Dollar Hegemony - 20th Sep 18
5 Things to Keep in Mind When Buying a Luxury Car in Dubai - 20th Sep 18
Gold Price Seasonal Trend Analysis - Video - 20th Sep 18
The Stealth Reason Why the Stock Market Keeps On Rising - 20th Sep 18
Sheffield School Applications Crisis Eased by New Secondary Schools Places - 20th Sep 18
Precious Metals Sector: It’s 2013 All Over Again - 19th Sep 18
US Dollar Head & Shoulders Triggered. What's Next? - 19th Sep 18
Prepare for the Stock Market’s Volatility to Increase - 19th Sep 18
The Beginning of the End of the Dollar - 19th Sep 18
Land Rover Discovery Sport 'Approved Used' Bad Paint Job - Inchcape Chester - 19th Sep 18
Are Technology and FANG Stocks Bottoming? - 18th Sep 18
Predictive Trading Model Suggests Falling Stock Prices During US Elections - 18th Sep 18
Lehman Brothers Financial Collapse - Ten Years Later - 18th Sep 18
Financial Crisis Markets Reality Check Now in Progress - 18th Sep 18
Gold’s Ultimate Confirmation - 18th Sep 18
Omanization: a 20-year Process to Fight Volatile Oil Prices  - 18th Sep 18
Sheffield Best Secondary Schools Rankings and Trend Trajectory for Applications 2018 - 18th Sep 18
Gold / US Dollar Inverse Correlation - 17th Sep 18
The Apple Story - Trump Tariffs Penalize US Multinationals - 17th Sep 18
Wall Street Created Financial Crash Catastrophe Ten Years Later - 17th Sep 18
Trade Wars Are Going To Crash This Stock Market - 17th Sep 18
Why Is Apple Giving This Tiny Stock A $900 Million Opportunity? - 17th Sep 18
Financial Markets Macro/Micro View: Waves and Cycles - 17th Sep 18
Stock Market Bulls Prevail – for Now! - 17th Sep 18
GBPUSD Set to Explode Higher - 17th Sep 18
The China Threat - Global Crisis Hot Spots & Pressure Points - 17th Sep 18 - Jim_Willie_CB
Silver's Relationship with Gold Reaching Historical Extremes - 16th Sep 18
Emerging Markets to Follow and Those to Avoid - 16th Sep 18
Investing - Look at the Facts to Find the Truth - 16th Sep 18
Gold Stocks Forced Capitulation - 15th Sep 18
Hindenburg Omen & Consumer Confidence: More Signs of Stock Market Trouble in 2019 - 15th Sep 18
Trading The Global Future - Bad Consequences - 15th Sep 18
Central Banks Have Gone Rogue, Putting Us All at Risk - 15th Sep 18
Gold Price Seasonal Trend Analysis - 14th Sep 18
Growing Number of Small Businesses Opening – and Closing – In the UK - 14th Sep 18
Gold Price Trend Analysis - Video - 14th Sep 18
Esports Is Exploding—Here’s 3 Best Stocks to Profit From - 13th Sep 18
The Four Steel Men Behind Trump’s Trade War - 13th Sep 18
How Trump Tariffs Could Double America’s Trade Losses - 13th Sep 18
Next Financial Crisis Is Already Here! John Lewis 99% Profits CRASH - Retail Sector Collapse - 13th Sep 18
Trading Cryptocurrencies: To Win, You Must Know Where You're Wrong - 13th Sep 18
Gold, Silver, and USD Index - Three Important “Nothings” - 13th Sep 18
Precious Metals Sector On a Long-term SELL Signal - 13th Sep 18
Does Gambling Regulation Work - A Case Study - 13th Sep 18
The Ritual Burial of the US Constitution - 12th Sep 18
Stock Market Final Probe Higher ... Then the PANIC! - 12th Sep 18
Gold Nuggets And Silver Bullets - 12th Sep 18
Bitcoin Trading - SEC Strikes Again - 12th Sep 18

Market Oracle FREE Newsletter

Trading Any Market

US Bond Market Operation Twist by Another Name and Method?

Interest-Rates / US Bonds Nov 21, 2017 - 09:52 AM GMT

By: Gary_Tanashian

Interest-Rates

The TIP/IEF ‘inflation gauge’ is still motoring upward after breaking above the SMA 200. If this turns the 200 up along with the MA 50 it could indicate a mini hysteria about inflation.


The problem lately has been that the longest duration bonds have been relatively strong, putting a cap on yields and inflationary signaling, if not indicating deflationary pressure. TIP/TLT has not nearly kept up as 30yr yields have been a big drag over the last couple of weeks (this could still turn out to be a bottoming pattern though).

Of course the Tin Foil Hat wearer in me wonders where some of this pressure might be coming from. Political and monetary authorities who have an interest in keeping long-term rates capped, maybe? Macro Tourist checks in with some details (last part of the article) about potential political shenanigans in the long-term Treasury bond market.

You Can’t Make This Shit Up

From WSJ:

The Treasury Department has unveiled a new strategy for managing federal debt that could ease pressures set to push up long-term interest rates and reduce a potential drag on the economy.

Under the plan unveiled earlier this month by Treasury, the department would increase the share of shorter-term debt issuance and reduce the share of longer debt issuance, ending a yearslong trend that favored long-term debt issuance.

Total issuance of government debt will still rise in coming years with growing federal budget deficits. As that supply increases, it is likely to weigh on bond prices, pushing up yields, which rise as prices fall. And Treasury yields influence other household and business borrowing costs throughout the economy, such as on mortgages and corporate bonds.

The Treasury’s new approach will shift some of that upward pressure on yields to shorter-term debt and away from longer-term debt.

That last sentence is key. What again was Operation Twist’s main goal as stated by the Fed itself? To “sanitize” inflation by driving up short-term yields and holding down long-term yields by selling and buying these maturities, respectively.

Call it what you will, but it is another proposed form of bond market manipulation and whether or not 30yr yields get to the Continuum’s limiter nearer-term, it could actually serve to aid our longer-term plan, which is for said yields to be limited at around 3.3%!

The greater point is that these manipulators can look at a chart just like you and I. They can see that something (bond yield secular decline) has been in place for decades and that something else (secular financial/economic growth) is probably dependent upon it.

Operation Twist’s goal was to sanitize inflation and by another method (issuance as opposed to bond selling and buying) the same effect seems to be getting schemed up at the Treasury department. I mean, the Fed is tapering out of QE, so they can’t very well literally implement Op/Twist Part 2, part of which required balls out buying of long-term debt.

On the macro view, the implication of the new scheme is for a flattening of the yield curve, except that… this…

Operation Twist got the party started to begin with, years ago at a very elevated and dire yield curve level. How far does Mnuchin plan to cut the meat to the bond manipulation bone? What will be its efficacy? Does anyone really have a method of quantifying the effects now that we’re years into uncharted territory of bond market manipulation? I have few answers, but lots of questions. I don’t think the bond schemers have answers either, and that’s scary when you think about it. They seem to be just kicking the proverbial can.

The yellow shaded areas on the 10-2 yield curve chart above are the economic booms, inflationary or otherwise. The white areas with the curve steepening? Not so much. Treasury’s plan seems pretty desperate given that the boom is indicated to be latter stage.

Subscribe to NFTRH Premium for your 40-55 page weekly report, interim updates and NFTRH+ chart and trade ideas or the free eLetter for an introduction to our work. Or simply keep up to date with plenty of public content at NFTRH.com and Biiwii.com. Also, you can follow via Twitter ;@BiiwiiNFTRH, StockTwits, RSS or sign up to receive posts directly by email (right sidebar).

By Gary Tanashian

http://biiwii.com

© 2017 Copyright  Gary Tanashian - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Gary Tanashian Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules