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US: Bonds
  • Interesting opinion:

    The recent losses from JPMorgan have proved to be much more based upon suspending gravity with 0% official rates in the Delta-Hedging complex game tied to the vast over-burdened Interest Rate Swap contracts, rather than the European sovereign bonds as first claimed. The Jackass is on record on May 11th, aided by the indefatigable forensic analyst Rob Kirby, in pointing to Interest Rate Swap stresses from the sudden March and April movement in the 10-year USTreasurys within the strained bloated USGovt sovereign bond market. The IRSwap setbacks were the underlying cause of the JPM losses. The giant bank does not want attention give to this derivative tool which controls the bond market in a devious artificial manner. As far as debt is concerned, the United States is Greece times 100. It is Italy times 20. It receives a pass from the bond market, precisely because the nation prints the money and controls the vast Interest Rate Swap support mechanism. But the tower is finally exposed.

    The IRSwaps act like giant buttresses to support the evergrowing USTreasury Tower of Babel that stretches to the sky. Every year, the expansive tower grows another $1.5 trillion higher. Every year, the challenge grows exponentially for the JPMorgan master financial engineers to apply their control panel magic to achieve equilibrium. Every year, the degree of difficulty becomes more arduous. Every year, the tower must withstand the high winds from Europe, where the bond market is doing more than undergoing stress. It is crumbling before our eyes. In a way, Europe helps to conceal the great strains from the broken USTreasury Bond market, held together by interest derivatives. Few analysts connect the failure of the Draghi LTRO funds to the JPMorgan losses. They do not grasp the gravity of the USTBond problem. They prefer to focus on FINREG for regulatory changes centered on the Volcker Rule, or on the division of proprietary trading. They focus on the personalities of the so-called Whale. Now a new verb has entered the lexicon, as a firm was just "Iksil-ed" to mean they suffered massive leveraged losses in a high risk game of playing god in the financial markets. JPMorgan cannot hedge since THEY ARE THE MARKET. What the Whale or JPMorgan do is attempt to maintain balance of the USTreasury Tower of Babel, which grows every year to try to touch the sky, to achieve the perfect world. They scrape the devil's attic door instead.

    Without any doubt whatsoever, the ultimate problem is that the bond market cannot defy the natural forces (gravity on the tower) from enormous new supply coming to the USTBond market (higher tower) in the form of $1.5 trillion deficits, and keep the bond yield at 0% for the FedFunds and under 2.0% on the TNX. Essentially the 0% rate is an engineering display of the most extreme arrogance. It is tantamount to placing the buttress support structure at a very low position. The sovereign bonds of Southern Europe with their 5% or 6% bond yields have the equivalent of buttresses place in very high positions, sufficient to endure the whips and sways from the high winds and routine vagaries dealt by the never-ending global financial crisis. In my opinion, the global financial crisis is far more than that. It is instead a global monetary war, to preserve the USDollar supremacy at all costs, with victims being the Western banking systems and the Western economies. The entire platform that supports the major fiat currencies is collapsing, namely the sovereign bonds. The platform is breaking at its weakest points, where it has non-homogeneous planks in Southern Europe that do not fit together. Imagine how the USTreasury Bond market would look if all 50 states had their own sovereign debt as components to the entire USGovt. Imagine each year the $1.5 trillion in debt were apportioned as 15% to California, 4% to Texas, 8% to New York, 8% to Florida, in shared responsibility. Imagine each state had its own bond traded in a market that strived for equilibrium, each with a unique bond yield, all tethered to the USDollar. The United States would fracture in six months from the stress, not the least factor for which would be the apportionment of syndicate banker benefit and divvying up the war costs. That is Europe in parallel.

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    As you can see from the chart, the yield on the US 10-year Treasury bond market started to rise around the time Donald Trump won the election. It continued to rise for several weeks. Recently, however, the yield has fallen.

    [Sean Callow, senior currency strategist with the Westpac Bank in Sydney]: "it's unusual to see two major markets (the bond and stock markets) diverge so obviously on a single issue. Essentially the stock market thinks Mr Trump will succeed, and the bond market still needs convincing.

    "something's gotta give". What he means by that is that either Mr Trump will deliver, and bond yields will rise again, or Mr Trump will fail, and the US stock market will correct.

    I suspect a major market judgement on the presidency is imminent given the all-time highs the stock market is pushing, and the degree to which the bond market has pulled back.