Bonds!

[Kupotea]

11 hours ago, Gregmal said:

To what? Where do people go? Cash? lol 

The obvious answer is gold both in a historical context and based off of central bank policy ever since the US weaponized the dollar against Russia. Just look at the price action recently and since covid. Global currencies get devalued, debt devalued, real assets are the place to be. 

[formthirteen]

18 minutes ago, Dinar said:

Fairfax has I believe 4 year duration, and owns almost exclusively US Treasuries.  As spreads increase, it can swap treasuries for high grade corporates, and increase interest income by 30%.

 

Great, thank you.

[gfp]

Imagine you're Brian Bradstreet and you have a little barbell approach going to hit some average duration and you get yet ANOTHER chance to put on some 4.9% 20 year US government paper right before a recession.  I mean, that's sort of tempting right...?

 

https://www.cnbc.com/quotes/US20Y

[TwoCitiesCapital]

3 hours ago, gfp said:

Imagine you're Brian Bradstreet and you have a little barbell approach going to hit some average duration and you get yet ANOTHER chance to put on some 4.9% 20 year US government paper right before a recession.  I mean, that's sort of tempting right...?

 

https://www.cnbc.com/quotes/US20Y

 

+1 

 

I haven't dug into their maturity disclosures to know if they're barbell'd - but it isn't a bad approach to get the higher yields a the front end with a leveraged inflation kicker. 

 

In Q4, they disclosed losses on treasuries and Treasury FORWARDS. Perhaps futures/forwards is how they prefer to add duration instead of cash bonds themselves. 

[gfp]

I think one of the things people miss when they freak out about the treasury market disruption this morning is that it wasn't some decision by foreign investors to boycott / sell US treasury debt - these foreign treasury holders own OFF THE RUN treasury securities and these are way more illiquid that you might think.  That's probably why things like the "20 year" were the sweet spot of opportunity this morning - you could buy 20 year US government paper and lock in 5% for 20 years this morning.  I know you inflation freaks think that's a shit deal but that will go down in history as another epic opportunity for the insurance fund manager set.  The 20 year maturity is probably the least liquid and most 'off the run' portion of the curve.  It always seems abnormally high yielding to me.

 

They sell treasuries when they need US dollar cash.  The reserve assets are what they have to sell overnight to get the dollars they need.  Chinese RMB is weak as hell against the dollar - nothing like almost every other currency paired with USD.

 

When the shit is hitting the fan, sometimes there are disruptions in the treasury markets - especially during Asian business hours.  But it is always short term noise because a US treasury security is still the most pristine collateral for any kind of leverage or swap or other transformation of one type of capital to another.  Maybe there are liquidations because repo markets tighten up but that doesn't change the fact that there is no better collateral to post than a US treasury security.

 

My chart mentor back when I was a kid used to call this the "bullish launching pad pattern" LOL..

 

 

 

edit: should have probably posted the off-shore Yuan rate chart!  Even more chaotic

 

Edited April 10, 2025 by gfp

[Parsad]

13 hours ago, Kupotea said:

The obvious answer is gold both in a historical context and based off of central bank policy ever since the US weaponized the dollar against Russia. Just look at the price action recently and since covid. Global currencies get devalued, debt devalued, real assets are the place to be. 

 

Gold actually declined during the spurt in tariffs.  You are better off owning land.  As Buffett suggests, I would much rather own productive land than gold. 

 

And if you are pro-active, you can buy cheap securities that may be declining, but easily overcome any value of gold when things recover.  Such as the last month. 

 

Cheers!

[Gamecock-YT]

21 minutes ago, gfp said:

 

 

My chart mentor back when I was a kid used to call this the "bullish launching pad pattern" LOL..

 

 

 

edit: should have probably posted the off-shore Yuan rate chart!  Even more chaotic

 

 

Triple top with increasing momentum?

[gfp]

2 minutes ago, Gamecock-YT said:

 

Triple top with increasing momentum?

 

That's what the chart looks like WITH government intervention...  Imagine how crappy it would look without a constant "band" of gov. control and signaling!

 

I learned so much about charts from this fat old Michigander named Mike Parnos and one other old midwesterner as a young kid.  Those guys were the best - salty and lazy and tons of experience.  And that midwestern accent.  I still hear their voices in my head when position goes against me - "GTFO" - "get the funds out!"

Edited April 10, 2025 by gfp

[gfp]

I just hope mr. Bradstreet wasn't at the Fairfax India annual meeting and was at work buying 20 year treasury bonds this morning like a good solider.  

[tede02]

There's good reporting this morning in the WSJ about how the bond market was a major factor in pushing the White House into a pause. It's pretty clear that Bessent and Lutnick know that if long rates shoot toward 5% (and beyond), that is going to be a huge problem not only for consumers, but indebted governments, commercial real estate and ultimately equities. 

[gfp]

Here we go again with this "20 year" index - get Mr. Bradstreet back into the office

 

[Spooky]

On 4/9/2025 at 11:45 AM, mattee2264 said:

For the bond experts on here what is going on with 10 year US Treasuries?

 

Usually when a recession and rate cuts are priced in you'd expect it to slide especially with additional buying as investors flee to safe havens.

 

Is it the bond market pricing in the inflationary impact of tariffs? Or is it countries like China selling off US bonds as a retaliation measure?

 

 

 

Part of this and the sharp sell-off we experienced has to do with some unwinding of the basis trade in US treasuries by hedge funds. Hedge funds have trillions of dollars in this trade and were facing margin calls leading to a dash for cash.

[Spooky]

[Spooky]

https://on.ft.com/3EieoRn

 

FT has had a series of good articles on the treasury sell-off and the basis trade lately.

[Kupotea]

11 hours ago, Parsad said:

 

Gold actually declined during the spurt in tariffs.  You are better off owning land.  As Buffett suggests, I would much rather own productive land than gold. 

 

And if you are pro-active, you can buy cheap securities that may be declining, but easily overcome any value of gold when things recover.  Such as the last month. 

 

Cheers!

Gold declined during the tariffs because everything declines when you get that sort of sell off and the margin calls come. Just look at its relative strength during and after. 
 

I’m not suggesting to own physical gold as a retail investor. What I am saying is as an institution or central bank when everyone says there’s no alternative to the USD they’re wrong. Gold provides a reserve currency function without counter party risk. It’s funny you mention land because i was just reading about how land barrons tried to get the bank of england to collateralize land as fiat in the 1690s but it never took off for somewhat obvious reasons.
 

My gold royalty stocks and miners are the reason I am up 25% YTD while the broader market is down. I will likely sell some to rotate into beaten down stocks opportunistically but it’s not like these miners are expensive (the opposite). Trump has made it clear the US does not want to be the reserve currency of the world and as a foreign national or institution (particularly china) you need to start wondering if your USD investments are safe from potential confiscation or debasement. That sounds like hyperbole but the fact that it’s even remotely possible means many owners will be looking to sell. Gold miners or royalty cos today are very similar to buying oil and gas stocks AFTER the covid vaccines were announced in 2021.
 

Check out VOXR if you want a safe play on the precious metal space. Skate to where the puck is going and all that.

[Gregmal]

3 hours ago, Spooky said:

The “smart money” and pod shoppers are the real cockroaches in the system. Pretty much worthless, zero value leeches.

[dwy000]

10Y T Bond now over 4.5% and rising.  And that's just on the back of Japan, EU and Canada selling (not China yet).

 

Expect a "deal" soon. Maybe not over the weekend because nobody can front run that. 

[KFRCanuk]

28 minutes ago, dwy000 said:

10Y T Bond now over 4.5% and rising.  And that's just on the back of Japan, EU and Canada selling (not China yet).

 

 

I'm wondering why that is bad? I'm a bond layman.

Edited April 11, 2025 by KFRCanuk

[Ghost]

20 YR just went over 5%.  Mr. Trump is losing the trade war...he just doesn't know it yet. 

[Ghost]

4 minutes ago, KFRCanuk said:

 

I'm wondering why that is bad? I'm a bond layman.

 

 

This sums it up well enough. https://deanblundell.substack.com/p/carneys-checkmate-how-canadas-quiet

 

How Treasury Bonds Work and Why a Global Sell-Off Could Tank the U.S.

• What Are Treasury Bonds?

  • They’re IOUs the U.S. government issues to borrow money.

  • Countries, banks, and investors buy them, lending cash to the U.S.

  • The U.S. promises to pay back the loan with interest over time (e.g., 10 years).

• Who Owns Them?

  • Foreign countries hold $8.5 trillion of U.S. debt (as of 2025).

  • Big players: Japan ($1 trillion+), Canada ($350 billion), EU nations ($1.5 trillion combined).

  • They buy bonds to park money safely and earn steady interest.

• How Do They Affect the U.S.?

  • The U.S. uses this borrowed cash to fund everything—military, Social Security, tax cuts.

  • Cheap borrowing keeps the economy humming; the government spends more than it collects in taxes.

• What Happens in a Coordinated Sell-Off?

  • If countries like Canada, Japan, and the EU start selling bonds together (even slowly):

    • Flood of Bonds: Too many bonds hit the market at once.

    • Prices Drop: More supply than demand pushes bond prices down.

    • Interest Rates Spike: When bond prices fall, yields (interest rates) rise to attract buyers.

• Why Does This Hurt the U.S.?

  • Borrowing Gets Expensive: Higher interest rates mean the U.S. pays more to borrow.

  • Debt Snowballs: The U.S. owes $34 trillion already; pricier loans make it harder to manage.

  • Dollar Weakens: Selling bonds means dumping dollars, so the currency’s value drops.

• How Does This Cause a Depression?

  • Spending Dries Up: Government cuts back as borrowing costs soar—fewer jobs, less aid.

  • Businesses Tank: Higher rates choke loans; companies can’t expand or hire.

  • Imports Cost More: A weaker dollar makes foreign goods (oil, tech) pricier, jacking up inflation.

  • Markets Crash: Panic hits stocks and banks as confidence in U.S. debt fades.

• The Domino Effect:

  • Jobs vanish, prices spike, savings erode—classic depression triggers.

  • A slow, coordinated sell-off isn’t a bluff; it’s a quiet gut punch that would take the US YEARS to recover from.

[gfp]

9 minutes ago, Ghost said:

 

 

This sums it up well enough. https://deanblundell.substack.com/p/carneys-checkmate-how-canadas-quiet

 

How Treasury Bonds Work and Why a Global Sell-Off Could Tank the U.S.

• What Are Treasury Bonds?

  • They’re IOUs the U.S. government issues to borrow money.

  • Countries, banks, and investors buy them, lending cash to the U.S.

  • The U.S. promises to pay back the loan with interest over time (e.g., 10 years).

• Who Owns Them?

  • Foreign countries hold $8.5 trillion of U.S. debt (as of 2025).

  • Big players: Japan ($1 trillion+), Canada ($350 billion), EU nations ($1.5 trillion combined).

  • They buy bonds to park money safely and earn steady interest.

• How Do They Affect the U.S.?

  • The U.S. uses this borrowed cash to fund everything—military, Social Security, tax cuts.

  • Cheap borrowing keeps the economy humming; the government spends more than it collects in taxes.

• What Happens in a Coordinated Sell-Off?

  • If countries like Canada, Japan, and the EU start selling bonds together (even slowly):

    • Flood of Bonds: Too many bonds hit the market at once.

    • Prices Drop: More supply than demand pushes bond prices down.

    • Interest Rates Spike: When bond prices fall, yields (interest rates) rise to attract buyers.

• Why Does This Hurt the U.S.?

  • Borrowing Gets Expensive: Higher interest rates mean the U.S. pays more to borrow.

  • Debt Snowballs: The U.S. owes $34 trillion already; pricier loans make it harder to manage.

  • Dollar Weakens: Selling bonds means dumping dollars, so the currency’s value drops.

• How Does This Cause a Depression?

  • Spending Dries Up: Government cuts back as borrowing costs soar—fewer jobs, less aid.

  • Businesses Tank: Higher rates choke loans; companies can’t expand or hire.

  • Imports Cost More: A weaker dollar makes foreign goods (oil, tech) pricier, jacking up inflation.

  • Markets Crash: Panic hits stocks and banks as confidence in U.S. debt fades.

• The Domino Effect:

  • Jobs vanish, prices spike, savings erode—classic depression triggers.

  • A slow, coordinated sell-off isn’t a bluff; it’s a quiet gut punch that would take the US YEARS to recover from.

 

was this written by a 3 year old?  Buy bonds!

[gfp]

What a day!  My top three positions are ripping higher and I got to go long the long bond.  I'm out 

 

[beerbaron]

The Carney article lacks so much supporting evidence it falls in the category of conspiracy. Not that i would not like it to be true tough.

 

What i would say though is that there was probably an intent to Carney visit to Europe other than sending a message to the US. Strategic discussion were probably held.

[Eldad]

23 minutes ago, gfp said:

What a day!  My top three positions are ripping higher and I got to go long the long bond.  I'm out 

 

Gfp what is the idea? Rates will definitely be cut and long bonds bought by Feds when SHTF? 
 

 

Edited April 11, 2025 by Eldad

[LC]

JPow's term goes thru May 2026 and I'd imagine he will want to wait and see at least two quarters of economic decay (i.e. rising unemployment) before taking any real action. First, to maximize the knife twist to Trump, and second because I think if he just sees rising rates with stable inflation and stable employment, he won't take action.