Bonds Bonanza – UST Sell Off

13/08/2012 by

Between Nov 2011 and Feb 2012 this year, 10Y yields traded in a 25 bp range, a very nice flat valley plain between the little hills sandwiching them.

I am just starting to believe that yields are here to stay and it seems I am not the only one.

Check out the holdings of US Primary Dealers over the past month.

	1-Aug
PRIMARY DEALER HOLDINGS	LAST PX	MTD	DIFF
U.S. Govt	545.24	487.044	58.196
T-Bills	76.157	70.317	5.84
Notes < 3 Yrs	137.02	145.311	-8.291
Notes 3-6 Yrs	128.46	113.965	14.495
Notes 6-11 Yrs	153.863	110.136	43.727
Notes 11+ Yrs	36.341	34.1	2.241
TIIS	13.398	13.215	0.183
Fed Agency	43.012	42.597	0.415
Discount Notes	31.42	29.157	2.263
Agencies < 3 Yrs	6.111	7.99	-1.879
Agencies 3-6 Yrs	2.955	3.759	-0.804
Agencies 6-11 Yr	1.745	1.276	0.469
Agencies 11+ Yrs	0.78	0.416	0.364
Mtge-Backed	255.362	263.604	-8.242
Corporates	87.104	107.93	-20.826
Corporate < 1 Yr	67.412	88.443	-21.031
Coprotate > 1 Yr	19.693	19.487	0.206

I am not alone !! Charts are screaming for the 1.25% handle and it looks like Primary Dealers are running ahead of themselves.

Now I suspect we will have our Great Annual Sale soon.

And I am not alone again. And I have a Harvard man on my side.

How Long For Low Rates ? By Kenneth Rogoff : 9 AUG 2012

And he hasn’t seen this chart below yet.

And all the US Primary Dealers are using this Seasonality Chart as a selling point now ! BEWARE ! 10y yields have fallen every August for the past 5 years !