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Thread: Bond Markets

  1. #1
    Legend peat's Avatar
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    Default Bond Markets

    Anyone else looking at the bond market tradeables?

    Using the abnamro market index platform (trial) which runs on the Oanda engine I've got a short here in US-TBonds since 21 May.

    All this talk of inflation will drive bonds down perhaps. Certainly seems like a new trendline (Red) is forming after the break of the old green one. Currently up nearly 300 demo pips . Having a position certainly assists familiarizing oneself with a market I reckon.
    I'm going to leave the stop where it is now at break even and move the take further down.


    Theres a few other interest market instruments in the platform such as US T-Notes, Bunds, and Bobls.
    For clarity, nothing I say is advice....

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    How has the bond trading going?

    I was unaware that these were available.
    Death will be reality, Life is just an illusion.

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    Legend peat's Avatar
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    +330 now. did what i said with tp moved down. this is a long term trade.
    For clarity, nothing I say is advice....

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    Senior Member Halebop's Avatar
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    Inflation looks on the verge of being out of control to me. If you can handle the volatility, I think a medium+ trade should do OK. The negative is lots of Macro factors beyond the ability safely analyse or forecast - for instance if we head in recession without much inflation, those bonds will become a safe haven rather than an overpriced security.

    Good luck!

  5. #5
    Legend peat's Avatar
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    ABN Amro comment today

    The ECB's heavy hint it would hike its refinancing rate at its next meeting in July caused a
    dramatic re-pricing of short-term interest rates in the euro area (see page 2). For much of
    the past six months, markets had been betting the ECB would be forced to follow the Fed's
    aggressive policy easing. But I think the ECB has now turned the correlation between US
    and European interest rates on its head. Instead of the Fed leading the monetary policy
    cycle, I think the ECB has now assumed leadership. If the ECB hikes in July (and again in
    October), I'd expect the euro to strengthen. The corresponding fall in the dollar, with its
    impact on US inflation prospects, might force the Fed to consider tightening later this year.
    Markets are discounting significant rate hikes in the US and even the UK.
    Unsurprisingly, the shift in short-rate expectations has also had an impact on long-term
    interest rates. Bond yields have risen significantly from their lows earlier this year. Still, I
    think there is scope for yields to rise much further, particularly in the US. There are three
    reasons. First, real yields are still too low. At the height of the credit crisis, US 10-year real
    yields fell to just 1%. Since then, yields have risen to around 1½%. In spite of recent inflation
    worries, this rise in real yields is the principal explanation for higher US Treasury yields. Yet,
    even if the US's long-term real growth rate has fallen to 2½%, this would suggest real yields
    have further to rise. Over the cycle, I'd expect real yields to average at least 2½%. If the
    economy stabilizes, then real yields should continue to rise.
    Second, bond markets are still too sanguine on inflation expectations. While implied
    breakeven inflation rates have drifted up, they are still low in the context of current headline
    inflation rates and the dramatic spike in household inflation expectations. It seems to me that
    bond markets are implicitly assuming that central banks will be successful in curbing
    inflation in the medium term. I'm reasonably happy to make this assumption about the ECB
    but I'm more sceptical about the Fed. While Mr Bernanke has become notably more hawkish
    in recent weeks, I'm not convinced the Fed will be willing to tighten policy aggressively in the
    short term. This scepticism also informs my third concern about bond markets. The term
    premium is still too low. While risk premiums have risen in many other asset classes,
    government bonds have been relatively untouched. With weak growth and rising inflation, I
    think bonds should price in a greater risk of a policy error.
    For clarity, nothing I say is advice....

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    Legend peat's Avatar
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    added short US T-bond at 114.99 (demo)
    For clarity, nothing I say is advice....

  7. #7
    Legend peat's Avatar
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    bump this thread for Dr Who

    how does one take advantage of falling bond prices? one sells bonds!

    T-Bonds... T-notes, Bunds , Bobls , are the instruments available in the ABN Amro Market Index platform (now being run by Royal Bank of SCotland)
    For clarity, nothing I say is advice....

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    Legend peat's Avatar
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    interesting article focussing largely on bonds here

    http://www.nzherald.co.nz/business/n...ectid=10554405

    interesting to note too that another article in the Herald is espousing the virtues of corporate bonds as a way of counteracting the falling interest rates on offer and yet this article shows that higher yield bonds often dont participate in the capital gain associated with a flight to quality climate. "Higher-risk bonds often morph into shares at the first sign of trouble and drop in price"

    selling US T-bonds on the 13th Jan has now yielded 800 pips.
    For clarity, nothing I say is advice....

  9. #9
    Guru Dr_Who's Avatar
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    Do you think the world will continue to buy US debt?

    There must come a time when the world will say enough is enough and not buy US debt.
    Having got ourselves into a debt-induced economic crisis, the only permanent way out is to reduce the debt – either directly by abolishing large slabs of it, or indirectly by inflating it away.

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    Legend peat's Avatar
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    In the past it has been argued that China will protect its already massive investment in USD by continuing to support the US Treasuries market.
    The argument was the two economies were symbiotically linked with a circular flow of money. Wanna buy my widgets? Sure , will you lend me the money?

    It will be interesting to see how this pans out in the new contractionary environment.
    For clarity, nothing I say is advice....

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