Monday, March 19, 2012

Bondmageddon Is Here!

I should warn you up front that there may be some sarcastic activity in this post. Stranger things have been known to happen.


Click to enlarge.

If you squint just right then you can see the massive increase in the interest rate of the 10-year treasury inflation protected security in 2012. It's nearly back to 0.0%! For heaven's sake, lock up the children! 3.0% here we come! Baby needs new shoes and I'm feelin' lucky!


Click to enlarge.

If you pull out the electron microscope and continue to squint then you can see the uncertainty in the bond market. Just look at that distance from the yellow dot to either the blue or the red trend lines! Shocking! How ever will we recover from this and get back on either trend?! Seems unlikely, if not impossible!


Click to enlarge.

Behold the massive fluctuations seen in interest rates! See with your own eyes the carnage that is taking place in the bond market so far in 2012. There's just no telling what might happen next! Chaos! Anarchy! At the very least, sarcasm!

Hey, what can I say? This has to be the most boring certainty vs. uncertainty update yet. I simply tried to liven it up a bit. ;)


March 18, 2012
Surprise Increase in Rates Is Credited to Signs of Recovery

“It clearly caught everyone’s attention,” said Jim McDonald, chief investment strategist for Northern Trust in Chicago. “When something moves like this, by definition it’s a surprise.”

Here's my take on it. I believe that the magnitude of the surprise increase is directly proportional to the strength of the recovery. And what do I mean by that? If you squint just right and have an electron microscope at your disposal then you can see the strong recovery in all its grandeur too, lol. Sigh.

See Also:
Certainty vs. Uncertainty Update
Sarcasm Disclaimer

Source Data:
FRB: Selected Interest Rates
US Treasury: Interest Rates

3 comments:

Troy said...

http://research.stlouisfed.org/fred2/graph/?g=5NX

blue is 10 year TIPS, red is inverted national debt.

I posted this on DeLong's in response to http://delong.typepad.com/sdj/2012/03/since-the-inception-of-10-year-tips-issues.html#comments

Stagflationary Mark said...

Troy,

TIPS have been good to me.

That said, I have to wonder how many TIP investors realize that their fund has a -0.51% real yield to maturity though.

I especially wonder when TIP becomes the ETF Chart of the Day.

Stagflationary Mark said...

One more thought on your comment.

If it is true that excessive debt bogs down an economy (I'm fairly sure it does) and...

If it is true that TIPS yields tend to track real GDP growth (I'm fairly sure they do most of the time) then...

Your chart would seem to have a basis in fact.