-- Posted Thursday, 21 June 2007 | Digg This Article
| Source: GoldSeek.com
Rick’s Picks
Thursday, June 21, 2007
“Phenomenally accurate forecasts”
We’ve been monitoring the T-bonds’ vital signs closely lately, looking for evidence that yields may have peaked, at least for the time being. Unfortunately, it looks as though any respite for borrowers, particularly mortgage borrowers, will be short-lived.
Bonds prices had fallen quite sharply last week, causing yields on the 10-Year Note to spike to 5.25 percent, their highest level in more than five years. At the same time, the yield on 30-Year Treasurys surged to 5.12 percent from 4.96 percent in a single day. Because mortgage rates follow the 10-Year Note, just one more turn of the screw could push the benchmark 30-year fixed-rate loan to 7 percent.
The surge in yields has abated since, giving way to a bond rally that so far looks unimpressive, especially considering how extremely oversold the bonds had become. At the rally’s outset we were looking for the September T-Bond futures to hit 107^12 on the first bounce, and to get short if and when they got there. Alas, they came within ten ticks of that price yesterday before relapsing to 106^13.
Short Unfilled
The short recommendation appeared in the Touts section of Wednesday’s newsletter and was given as follows: “The futures are stealing up on a minor Hidden Pivot at 107^12 that can tell us whether a significant turn in interest rates has occurred. If this rally is something more than a bear-market blip, the September contract should have little trouble eating through the target within hours of first encountering it. You can try shorting there with a 3-tick stop, but you'll be on your own if the order fills. This is meant as a scalp-trade, so a pullback of as little as 8-9 ticks should be viewed as a profit-taking opportunity.”
The fact that the September Bond has struggled so badly to reach an “easy” Hidden Pivot is not a healthy sign. While it is not yet reason for bulls to throw in the towel, on the evidence so far we would infer that the rally lacks the guts to kick off a major turn in bond prices. Of course, the outlook would improve if the next minor rally meets or beats its Hidden Pivot target, but until such time as that occurs we’ll stick with our pessimistic forecast.
Free Issue of Privateer
For a superb international perspective on interest rates and other timely topics of economic inrerest, we strongly recommend The Privateer, an Australia-based newsletter published by William Buckler. His latest issue, titled “The Big Global Turn,” sees the start of interest rate wars that will alter the global economic landscape. “For thirty years,” he writes, “since the peak of U.S. interest rates in 1981, Americans and most of the rest of the world have lived in a situation of falling interest rates. Many have known nothing else. That era has now ended. U.S. debts are about to become a burden. The U.S. Treasury has to start repaying.”
Just so. This fits with our own forecast of a global debt collapse and severe deflation. We have long maintained that an increase in the real burden of debt would set deflation in motion, and that day appeasr to have arrived. For a free issue of The Privateer, click here, and for other links related to the site, click here.
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Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2007, Rick Ackerman. All Rights Reserved. www.rickackerman.com
-- Posted Thursday, 21 June 2007 | Digg This Article | Source: GoldSeek.com
