Bonds Tell Bernanke to Shove His QE Directly Up His Assets

Snicker snicker, looks like the market is getting a bit woozy on the free money.


The U.S. bond market has begun sending a message that inflation risks are rising and the Federal Reserve may be too slow to act, potentially marking a significant turning point in the economic recovery.

In the past week, Treasury-bond yields have jumped to their highest levels since last spring. Yields on 10-year Treasurys surpassed 3.5% and 30-year yields broke through 4.7%, which makes some worry could mean rates will march even higher.

Long-term rates have been gradually moving higher in response to an improving economy and rising commodity prices. But in recent days the increases in yields accelerated, a move many say is due to the worry that the Federal Reserve may be underestimating inflationary pressures in the economy, and may act too slowly to tame them.

WSJ incorrectly attributes some of this to bond vigilantes trying "to change government policies by driving interest rates higher" but last I checked, most of the vigilantes were just trying to protect their investments and even the most hard core of them are smart enough to start backing away slowly.

Hint: when Bill Gross starts talking about the dollar as garbage, it might be time to pull out and let this correct itself the way it should have before Bernanke and Co. started thinking they were Ganesh of the All-Seeing Central Bank.

Vigilantes? More like karma.

Today, our hit or miss buddy Bill wrote on PIMCO's site "Old-fashioned gilts and Treasury bonds may need to be 'exorcised' from model portfolios and replaced with more attractive alternatives both from a risk and a reward standpoint." Remember, bonds are his thing. Think that might be a big fucking red flag?

Jr Deputy Accountant

Some say he’s half man half fish, others say he’s more of a seventy/thirty split. Either way he’s a fishy bastard.


Bob English said...

WSJ may be bottom-ticking T-Bonds with this story. That pop in the 30 yr yield over a trendline that held since 1990 is just begging to be reversed hard. We'll see 6.00+ in 2011, but probably visit 3.85%-4.15% first. Question is how? Call me a conspiracy theorist (no really, please), but the Bernank needs to orchestrate a risk correction and the fins look ripe. Gross himself could take down BAC:

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chairmanben said...

Dual mandate!

There's nothing wrong with the American Peso...

Bill Gross should stick to pilates

Bob English said...

And....we hit 3.79% today, closing at 3.87%. Good job WSJ at top-ticking the yield.