Friday, August 15, 2014

if you read anything today: Yield; Its Fed Policy Path Uncertainty Not Ukraine

It is more the new uncertainty surrounding Fed policy path, rather than the current geopolitical event that is the reason for short-covering. This was going to happen with or without Ukraine news. More should be expected in this move as we reach for another in a series of 'cyclical yield lows'. You will remember from my writings over the last three years that important yield lows levels have been reached in the last 1/3 of the year and have marked the low yield mark until the end of Q1 next. I shall be looking again for this development to shape.
look to the generic 10yr chart enclosed, noting the important yield lows marked late in the 3rd quarter or early in 4th quarter. These yield lows, detected using parameters proved instructive over the last 15 years have provided incredible positioning opportunities over the following 6 months. This in particular over the last three years. Developments are not too dissimilar this year from the last three. see also The Fed and Interest Rates

From: MARTIN MCGUIRE : Aug 15 2014 09:56:00
Subject: Treasuries Expand Gains…in search of the short-covering event-Ukraine
We are not far from a short covering event. We hear that Ukraine forces attack armed convoy from Russia. There is a new multi-month high reached in TY and the prospects for a greater short-covering event seem heightened. There remains a number of shorts who were encouraged by the price action a week ago today who may more eagerly seek the shelter of the sidelines until some more formidable sell signal is seen. We should understand that while the volume of trade has been rather lacking, the prospects for greater response to a number of shorts trying to leave the 'room' at the same time might test the integrity of the door frame (see large jump in ty px)

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