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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: shades who wrote (52905)	2/7/2006 8:56:59 AM
From: russwinter	Respond to of 110194

Hal's post at the end is darn close. Actually it's being gamed, and benefiting from the "buy everything" leveraged cash is trash trade.

To: shades who wrote (52905)	2/7/2006 9:03:28 AM
From: UncleBigs	Read Replies (1) \| Respond to of 110194

It's been said that pension plans have a voracious appetite for 30 year treasury bonds. However this makes little sense to me. Most pension plans from publicly traded companies are using an assumed annual rate of return of 8% to 10%. If they put a chunk of cash to work at 4.5% fixed for 30 years, the equity portion of their portfolio would have to earn outrageously high rates of return to balance out to 8% or higher. I think pension plans have greatly increased their equity and risk exposures over the last few years in order to justify to their auditors their high rates of expected return. They can point to high long term equity returns as justification for their expectations. However money sunk in 30 year treasuries takes the guesswork out of it. The 30 year auction will be very interesting. I'm not completely convinced the demand will be as strong as most seem to think.

To: shades who wrote (52905)	2/7/2006 10:40:14 AM
From: John Vosilla	Respond to of 110194

"So, the inflation story doesn't add up given the disconnect between commodity prices and bond yields. Perhaps we could look at the demand and supply dynamics in the bond market to help explain. For example, in the UK long real yields have been squeezed right down not due to a view on inflation, but due to restricted supply and super strong institutional demand. Given that the pension crisis is also an issue in the US I wonder if long yields are also being held down by institutional demand and are a false representation of the inflation outlook?" Good summary Nothing adds up these days.. Only thing for sure is coastal bubble housing markets are way overvalued in any scenario. Same with long term treasuries unless we have a coming depression predicted by many here..