LT bonds up strongly today (Aug 16)

[nomamesbuey]

fyi - randomly noticed that LT US treasury bonds are way up today.  EDV 4.37%, TLT 2.49%.  Personally, since I custodian with Vanguard, I went with the MediumTex's recommended tactic of 50% EDV, 50% VUSTX method to purchase LT bonds.

Quick aside, in my 2 months experience with Vanguard Brokerage (VBS), they have been fantastic so far, in both low costs, & informative phone customer service.  Highly recommended both as a custodian, &/or an individual index mutual fund (such as VUSTX) or ETF (such as EDV) vendor.

I skimmed Google Finance, Yahoo Finance, Bloomberg front page looking for news headlines.  I did anything.  It does seem like a massive daily percentage change for an asset like a US Treasury.

Do you have any news/explanation for the massive change in LT bonds today?

Random note, as a HBPP-type investor, & an relatively inexperienced investor, it's notable as to how much focus the Bloomberg type websites have for stock, & the relative lack of coverage for other asset types, such as LT bonds & gold.  I suppose perhaps this is understandable since most personal US investors have majority 50-80% stock asset allocations in their portfolio.

[MediumTex]

A few reasons I can think of:

- Curve flattening between 10s and 30s.

- Traders trying to front run Bernanke's 30 year treasury purchases (likely to end in tears).

- Japan weaker than expected (global deflationary sign).

- Look at the German bond market--30 year yields are at 3%.  In many ways the long end of the U.S. treasury curve is just catching up with reality.

It's certainly fun to watch.  

I expect 30 year yields to go well below 2.5% before we are done (though that point may be years away).  It is the type of blow off top one would expect in the end stages of any secular bull market.  We've been building to this since 1982.

I may be wrong, of course, and that's why I use the PP.

[nomamesbuey]

MediumTex, thx for your reply/thoughts

- Look at the German bond market--30 year yields are at 3%.  In many ways the long end of the U.S. treasury curve is just catching up with reality.

Is there are site/ticker(s) that I could use to track non-US LT/30-yr bonds?  To my knowledge there is no US-traded index ETF or mutual fund that tracks non-US sovereign LT bonds.  These websites I'm familiar with do not seem to list the non-US actual bonds either, although I could be missing something obvious.

[foglifter]

In the broader context perhaps double-dip recession fears are making their way into the investors minds:
David Rosenberg: US 'Virtually Certain' to Fall Into A New Recession 

I second MediumTex's point: it's so good to be in PP!

[MediumTex]

MediumTex, thx for your reply/thoughts

- Look at the German bond market--30 year yields are at 3%.  In many ways the long end of the U.S. treasury curve is just catching up with reality.

Is there are site/ticker(s) that I could use to track non-US LT/30-yr bonds?  To my knowledge there is no US-traded index ETF or mutual fund that tracks non-US sovereign LT bonds.  These websites I'm familiar with do not seem to list the non-US actual bonds either, although I could be missing something obvious.

Look at Bloomberg under Markets/Rates and Bonds.  You will see the US, UK, Germany, Japan, Hong Kong, Brazil and Australia treasury markets.

[craigr]

Do you have any news/explanation for the massive change in LT bonds today?

I've seen articles recently indicating the Fed was doing more purchasing of bonds. This activity could easily influence the bond markets and drive prices upwards. Going against the Fed is generally not advised.

According to Morningstar we have for the portfolio:

Vanguard TSM: -1.56%
SPDR Gold ETF: +10.65%
iShares Short Term Treasury: +2.15%
iShares Long Term Treasury: +16.49%

YTD Return: +6.57%

I don't know if LT bonds will keep this up, but the news of their demise was clearly exaggerated.

[nomamesbuey]

I've seen articles recently indicating the Fed was doing more purchasing of bonds. This activity could easily influence the bond markets and drive prices upwards. Going against the Fed is generally not advised.

I read Kevin Phillips' nonfiction 2008 book "Bad Money", where Phillips mentioned the "Plunge Protection Team" aka http://en.wikipedia.org/wiki/Working_Gr ... al_Markets, started under Pres Reagan & Fed Chair Greenspan.  Greenspan & his PPT would secretly interfere in the financial markets to support the US stock market.  (I suppose Greenspan, literally an Ayn Rand mentee back in the day, was an extreme Free Market Fundamentalist, unless when it comes to his bailing out his Wall Street Welfare/Hedge Fund Hyena homies. Eg Socialism for the Rich).

craigr, is this 2010 action of the Fed buying LT treasury bonds a covert PPT action, or a stated transparent proper action?

[MediumTex]

craigr, is this 2010 action of the Fed buying LT treasury bonds a covert PPT action, or a stated transparent proper action?

Any PPT discussion requires tin foil hats all around.

I'm not saying that there isn't rampant manipulation of the markets by the big banks, the Fed, the Treasury and who knows who else, but I am certain that any such manipulation will never provide any retail investor with a reliable or tradeable edge, and thus I don't know how useful any PPT discussion is in practical terms.

The trouble with any conspiracy theory is that its shape tends to be determined by the worldview that one brings to the party.  One person looks at the market and sees the PPT at work, while another person looks at the market and sees an active central bank promoting market stability.

With all that said, I believe the PP is more or less PPT-proof.

[nomamesbuey]

MediumTex,

I was just curious as to the process of the Fed buying these LT Treasury bonds, was it something stated or covert.

I agree it doesn't matter, as financial news events in general do not matter as craigr points out, in terms of the HBPP asset allocation.

[MediumTex]

MediumTex,

I was just curious as to the process of the Fed buying these LT Treasury bonds, was it something stated or covert.

I agree it doesn't matter, as financial news events in general do not matter as craigr points out, in terms of the HBPP asset allocation.

Sorry, I mis-read the question.

The Fed did announce its intention to purchase longer dated treasurys, so I guess you would say it was not a covert action.