The Motley Fool Discussion Boards

Previous Page

Investing/Strategies / Bonds & Fixed Income Investments


Subject:  Betting on the Direction of Interest-rates Date:  1/4/2013  8:50 PM
Author:  globalist2013 Number:  34598 of 35923

Well. The FOMC meeting minutes were the watershed event that brought a HUGE dollar rally yesterday afternoon and overnight. The euro lost 1-cent, the yen is at a 2-year low VS the dollar, Gold has lost $35, and Treasuries are getting sold like funnel cakes at a state fair! What, in the world is going on here? Ahhh, grasshopper, the Fed threw a cat among the pigeons yesterday by saying in their minutes that they thought they would end their latest round of Quantitative Easing (QE) in 2013. For those of you keeping score at home, that’s $85 Billion in monthly bond purchases. So, from that you can see why Treasuries are getting dumped,, but the currencies and Gold? And did the Fed Heads say when they would end their latest round of QE in 2013? NO! So, it could end up being on the last day of 2013, when they also announce a new round of QE! Did the markets EVER take a moment to think of that scenario? NOOOOOOO! They just went “all in” and began selling Treasuries.

The 10-year yield, which yesterday morning was 1.83%, has risen to 1.96% this morning. (remember, as bond yields rise, the price of the bond drops) So, is this the watershed event that could swing a multi-year rally for the dollar? What I’m talking about here is will the rising bond yields remove the need to hold risk assets? That’s what it appears to be saying today. But let me remind you that we have seen these moves higher in bond yields a few times in the past couple