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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: gregor_us who wrote (12132)4/18/2004 1:38:36 PM
From: russwinter  Read Replies (3) of 110194
 
I think a lot of how bonds trade is the noise and lies coming out of the MoP. I would definitely not trade a bond rally, and certainly don't see 4.0% in the cards, but I'm just stepping aside. The "markets" (speculators) are willing to "believe" (or just go along) with this noise, as far as the next 10 bps, and it looks like the MoP is pulling out all the stops again. The irony is that this just accelerates the whole Train Wreck, inflation process, so consider a bond rally a major head fake of relatively short duration. The problem is that previously the financial markets kept getting the weak economic numbers they are addicted to without inflation. This time they will get the weak economic numbers accompanied by hot inflation reports, a completely different animal.

Going forward the landscape will look like this:

-More inflation news and concerns, fair April economic reports (question mark on the 5/7 jobs report) but getting worse as May and June are reported.

-The bond market has a decent supply profile until the third quarter, then extremely high supply. More and more signs of economic seizure coming out of Asia caused by spirling input goods spikes, and bottlenecks. I think some initial Chinese currency move comes by the end of May.
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