Treasuries Bubble?

[minimal]

For the past couple of weeks, I have been thinking that Treasuries are currently in a bubble. Today, on CNBC/Bloomberg all they have been talking about is the potential bubble in treasuries. So it got me thinking about it.

The fundamental reasons for treasuries price rally makes sense but I personally think its overdone. Even if the economy gets any worse over the next few weeks/months, I could still see a sell off in treasuires and dramatic rise in yields. Simply because I think the whole treasuries rally is overdone. Although if this does happen, I don't think it will have much of an affect on the S&P etc. On the other hand, if we get a good spurt of economic data coming out and the sell off in treasuries initiates, I reckon we S&P will see the highs of March.

I am interested to see other peoples view of this matter.

Cheers
Minimal

 

[arabianights]

My view is that it's all tied into inflation expectations. Eventually real money is going to want higher yielding assets in real terms, especially once we get past 5 year portion of curve... I'm not so sure a short of treasuries is the way to play this though (if it was I'd do 30 years and I'd drip feed it small size)... it may well be better to look at where the money will go once it's out of treasuries, which will presumably remain buoyed by the fed... identify those assets and you identify where the next bubble will be, and I expect that to be far more lively.

If I had to guess then I would say commodities or BRIC equities... (and out of BRIC I think C has best bubble potential, I has more real growth potential) but who knows... heck it could be housing again...

 

[minimal]

I agree with you. The whole reason I got thinking about this today was where the money would go, once out of treasires. Soon the real money will realise they can get higher yields elsewhere. For example, 2yrs (both german & US) are currently only yielding around 0.5% and 10yrs around 2.5%!

Ha it could quite possibly be housing!

 

[Martinghoul]

It's simple. If the US (and other Western economies) end up looking like Japan, Treasuries are nowhere near a bubble (10y JGB is yielding 90bps at the mom). Otherwise, yes, one could make a case that Treasuries have gone a bit crazy.

 

[arabianights]

It's a question of how one defines a bubble really. A classic bubble they need not be, but you can still say it's bad to keep money in them.

 

[arabianights]

(Still reckon the real money is going to be in looking out for the next bubble)

 

[TRADEFUTURES]

next bubble is agri commods. its already started. Rice, Cotton, Corn, Wheat, Oats, Sugar, Lean Hogs, Live Cattle, Soyabeans, Coffee...Etc

 

[highrisk]

the fed will continue to buy openly to keep the yields down to manage the debt. and maintain a cheap dollar to boost exports. it's a win-win situation for them. Europes debt woes and inability to manage them are playing well into the Fed's strategy, as big money is moving out of european bonds into treasuries.
I love the comments in the press about how the yields are too low to own treasuries. This misses the point that no one is buying treasuries for the yield, but for gain in face value.
In treasuries i trust.

 

[zsawevv212]

these days i'm also thinking about the bubble .it is really a big problem now and must be solved .if not the economy will get worse and worse may cause bigged trouble
it is bad for the development of society

 

[dccruibay]

bubble is really a bad thing .it is not good for development .
now many countries are facing this problem

 

[LeveredHedge]

"The biggest bubble right now is people looking for a bubble"

I am sticking to being short treasuries because I dont see much upside, but I do not expect for there to be a massive collapse, which imo is the defining characteristic of a bubble. As was said the Fed will keep yields artificially high as long as they feel the recover isnt the strong, and with Ben's statements about unemployment not returning to pre crisis levels for 4-5 years (at this rate we will be in the next bubble by then), the Fed stance isnt changing any time soon.

Another thing to remember is the whole euro crisis still hasnt unfolded , and Greece, Ireland, Portugal have a huge amount of debt to rollover.

 

[Jaydee]

"The biggest bubble right now is people looking for a bubble"

I am sticking to being short treasuries because I dont see much upside, but I do not expect for there to be a massive collapse, which imo is the defining characteristic of a bubble. As was said the Fed will keep yields artificially high as long as they feel the recover isnt the strong, and with Ben's statements about unemployment not returning to pre crisis levels for 4-5 years (at this rate we will be in the next bubble by then), the Fed stance isnt changing any time soon.

Another thing to remember is the whole euro crisis still hasnt unfolded , and Greece, Ireland, Portugal have a huge amount of debt to rollover.

I think you're right. It's just a case of when they fall of which I have no clue.