u.s. tbonds, page-10

Find8, I saw your question on Fri, but as the market was about to open, I turned HC off as I usually do during trading hrs. Seeing no one has yet answered I shall attempt.

Firstly, let me say I am puzzled by the lack of interest in the US bond market. It's two to three times bigger than the US stock market, and thus mighty influential to it. I'll get back to that at the end of this post, so it can be ignored easily if bored.

One point first: technically Treasuries up to one year are called Bills, to ten yrs are Notes, and longer are Bonds. Here I'll call all of them Bonds

The yield curve is over two periods of bonds: Usually it's the 2yr to 10 yr curve that is given. This is supposed to provide an idea of where inflation is heading. The Fed has always interfered with this natural process, but particularly since the GFC, and thus it's hard to get a realistic price on bonds and curve. Other important curves are the 'belly' 3yr /7yr and the long end 10y/30y. So you need two terms to get a yield curve.

Now a bit of bond info if your interested. Firstly, I don't trade bonds so my attempted knowledge is to get an idea where the world money is going, so I don't know the intricacies.

I read this page daily for my details. There are probably better ones But I'm too conservative to change: refresh where necessary

http://finance.yahoo.com/bonds/market_summary/article/200001/bond_ticker;_ylt=A0SO82GPathSlTIAGzgL5gt.;_ylu=X3oDMTByaDNhc2JxBHNlYwNzcgRwb3MDMQRjb2xvA2dxMQR2dGlkAw--

It gives major currencies, bond rates and results of auctions.

Bills are auctioned almost daily, and thus results are on the TREASURY page. Notes/Bonds are offered fortnightly, except Jan every three weeks. Usually on Tues/Wed/Thurs. Results are published above.

The buyers are divided into three classes. Indirect, bidders, direct bidders and primary dealers. Basically indirects are International Nations, directs are super funds etc and the primaries take what's left and on sell into the secondary market. It's been interesting to observe the cultural change of these buyers over the years.

PRICES: and why yield is inverse to price. There is a formula for when you need to use coupon rates for longer term, but for simplicity I'll use a one yr Bill. Say you wish to buy a one yr $100 Bill at 1% interest and that ends up being the rate the auction is priced at. You then give the Govt $99 and in a year's time you get back $100. If then the CPI comes in above expectations, at say 5% and interest on 1yr bill rises to 2% you may wish to get out and onsell for $98 into the secondary market. Thus you can note the inverse rate.

Bonds affect the stock market in many conflicting ways. In 1994, for example inflation was rising, spreads were increasing but not fast enough, prices of bonds were falling and the US stock market was savaged. Other times when the curve is high, the stock market rises even though bonds are weak. The same with POG: sometimes it generally rises with bond yields, and sometimes it goes inverse. ATM, the last few weeks, it's generally been inverse to yields and rising with bond prices. It's been rising with the rise of the DXY.

There is one more piece I wish to add. Before I got my first PC in 1997, I used to draw graphs daily of my 60 or stocks on my watch list. I'm not A T/A but it used to give me a constant refresher of how my stocks were going compared to others on my list. No, I 'm not proposing that, but it gave me an idea on writing some info on a weekly basis.

Here is my example: This week.

Au=$1254.10 Ag=$20.32 OIL 94.09 XAU=92.30 HUI=217.19 GLI=0.1420% DXY=81.18 A$=87.82 Gold/XAU Ratio=13.59 Gold/Silver=61.72 Au/Pt=0.86 DOW=16458 S&P=1838 Nasdaq=4197 All Ords=5316 TNX=2.82 CNY 604.55

Next week I'll cut and paste this and substitute the new prices. It reinforces what has been happening. Compare that with previous week:

Au=$1248.60 Ag=$20.17 OIL 92.86 XAU=87.05 HUI=204.02 GLI=0.1753% DXY=80.62 A$=89.92 Gold/XAU Ratio=14.34 Gold/Silver=61.90 Au/Pt=0.87 DOW=16437 S&P=1837 Nasdaq=4165 All Ords=5316 TNX=2.86 CNY 604.74

Notice small increase in POG, yet larger % increase in XAU and HUI than usual. (each 1% increase in POG should equate to just one 2% increase in XAU and HUI). Notice also this though the DXY has risen substantially. Also note big drop in GLI (one month gold lease rate).
Stock markets indices going nowhere, infact All Ords exactly the same. By writing these down you can get of the better, quicker feel for the change that appears to be happening.

Too long winded, you shouldn't have read it all like a lot of others.

Hope its some help for the newbies.

kg

PS: forgot to add, sometimes the yields are inverted, watch out for possible deflation.