Tuesday, June 2, 2015

Bond Panic Part 2

Looks like we are setting up for another bond panic here.  The 10 year yield refuses to drop below 2% and the German Bund got destroyed today, going up 16 bps to 0.71%.  The volatility in the Bunds are extraordinary.  It is not common for bonds to move more than 7-8 bps in a single day, but those long Bunds have been panicking when things go downhill.

It looks like we could test 2.40% sometime this month, as the Fed rate hike fears and Bund weakness combine to cause a risk off scenario for fixed income investors.  I am not going to short to try to capture that move, as the short bond trade is a little too crowded for me.  If we do get that bond panic, it should set up a great long term buying opportunity for bonds.

S&P remains untradeable, and seems like there are still too many bears for my liking to take a shot on the shorts.

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