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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: Crimson Ghost who wrote (77940)1/22/2007 9:13:20 AM
From: Rarebird  Read Replies (1) of 110194
 
>>Now lower oil prices mean OPEC has less cash to invest in bonds -- hence the recent weakness.<<

It appears that Saudia Arabia, for political reasons, is aiming to drive the price of crude oil lower. This is a complex political ploy on their part, but in the past they have done similar maneuvers to force compliance among OPEC members. Many are cheating on their quotas and with a further reduction in those quotas coming up at the beginning of February, the Saudis appear bound and determined to drive oil prices low enough to convince members that complying is their only reasonable course of action.

>>If oil drops to $40 will TNX yields surge over 5%?<<

Bonds were priced for a recession in December. This is why I shorted the 30 year bond via RRPIX at that time:

Message 23109361

At this point in the economic cycle, the economy is coming off a soft landing and any ease on the part of the Fed would simply fan the flames of inflation.

Unfortunately for some PermaBears, as bad as the housing sector really is, it's not nearly enough to push the economy into recession.

PS Bonds look like they may bottom out in price by the first or second week in February and embark on a counter-trend rally before they resume their decline.
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