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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: mishedlo who wrote (66533)7/20/2006 7:18:04 PM
From: russwinter  Read Replies (1) of 110194
 
Treasuries rally anyway.>

As usual you (and most others) completely miss the cause and effect. In my mind it's all part and partial of the same general Humpty Dumpty, the Fed is pausing (and will soon cut), and can get away with it trade. The playbook thinks the Fed will be right back to easing fairly aggressively before year end, and has already discounted it. You also have to ask why the BAA-one year CMT spread has shrunk back to nothing at 1.53%. Why is everybody so eager to hold junk bonds too? Answer, Humpty Dumpty, Fed pause and then cut, feed Bully and Mr.Creosote, blah, blah, blah.

Also when FCBs buy $5.5 billion in agencies in one week (week after week), it makes the supply of Treasuries all the more easier to service from other sources. Right now I think those "sources" are overtrading Humpty Dumpty speculators, they've just rotated again and are back to playing "pause and cut", as if the Fed actually controls longer dated issues.
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