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

To: Crimson Ghost who wrote (77940)	1/21/2007 8:05:46 PM
From: Mike Johnston	Read Replies (1) \| Respond to of 110194

I can still remember the days when plunging oil prices and resultant lower inflation was good for bonds. But no longer. Why should plunging oil prices result in plunging bond yields, if tripling of oil prices did not result in yields going up ? In the old days, oil rising from 25 to 75 would cause a significant backup in yields as well as a stock market selloff. But i guess old rules no longer apply. These days, economic trouble means rising stock prices, just like house prices have increased sharply from 2000-2003 despite plunging stocks, $7 trillion of lost stock market wealth as well as loss of a couple of million jobs in the technology, telecom and internet sectors in 2000-2002.

To: Crimson Ghost who wrote (77940)	1/22/2007 9:13:20 AM
From: Rarebird	Read Replies (1) \| Respond to 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.