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The Bond Market Crash Is Accelerating 10/21/22

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36 minutes ago, sandy beach said:

I believe the way it works is that the Treasury Borrowing Advisory Committee (TBAC) at their next meeting on November 1st would announce a plan for reverse auctions to buy back longer dated illiquid bonds. Normally they would fund this by issuing more short dated bills in the same amount. This time they have so much money in the Treasury General Account at the Fed from tax receipts they may for now just decide to buy bonds outright without issuing new bills. But the market could use more bills - so dunno.  I'm sure doc will correct me if I'm wrong.

I don't know either. Typically these things are always done by auction resulting in a market price.

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14 minutes ago, DrStool said:

Great piece, Lee. First thing I read this morning with my coffee. And thank you for making it so understandable that even a dummy like me gets it. Trust me, that's no easy task. 

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Sorry just can't resist a catchy headline....


Stocks and bonds still overvalued from what I can see.

Even if they get inflation down to 4%-5% that's still no real return on bonds at current rates....

And pivot/printing means more inflation.....

I still think this bear has 6 months to a year to go........

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Nice article by Bill Gross on his website about how Total Return Bond funds are just closet indexers.

And as a result their investors have taken a real bath in 2022.


But he does no really explain why...I will.....

It's all about the fees...which is all about AUM.

In order to survive against the Index funds the TRBF's have had to become closet indexers to stem the loss of AUM.

But this means they have have to give something up.....and that thing is downside protection which comes with the flexibility to shorten duration i.e. to not index.

The problem is the fund managers do not pay for the thing given up ....the bond investors do.......

So when they become closet indexers they get a valuable asset....a much longer lasting fee stream....resulting in much greater remuneration. But what they lose they dont pay for.

The classic situation of....Heads I win...Tales You lose.

And because of this lack of duration shortening in 2022 their investors have taken a bath.

But at the end of the year they will point out to their investors that the index funds did'nt beat them....so there is really no point in withdrawing funds and putting it in an index fund.

And the argument will probably work....mission accomplished.


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4 minutes ago, DrStool said:

I imagine this is hard to day trade.

Why yes, yes it is. 🙂 

Man oh man $DXY is getting taken out behind the woodshed and getting Old Yeller'ed. Not to be confused with Yellen'ed. She'll probably be taken out behind the political woodshed after the midterms, scapegoat style. 

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