More Market Thoughts

September 7th, 2008 4:16 pm | by John Jansen |

I had done all the writing I could earlier for a Sunday.

 I think that  credit spreads of every type will tighten. I think that the Treasury yields will do the brunt of the work. The 10 year Treasury has just completed a rally from 4.25 percent down to the middle 3.50s following the employment report on Friday. I would not be surprised to see that instrument revisit the 4.00 percent level.

Similarly the 2 year note had traded around 3.125 percent and on Friday morning it traded in the ether close to 2.10 percent. With the Federal Reserve on hold for several more months that is crazy. I would expect that the 2year note will settle in somewhere between 2.75 percent and 3.00 percent. There is much fear priced into that instrument and as there is a return to normalcy the 2 year note should suffer inordinately.

Risk assets of every ilk should benefit and the greatly oversold stock market should rally dramatically.

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  1. 3 Responses to “More Market Thoughts”

  2. By Fullcarry on Sep 7, 2008 | Reply

    Well John as you predicted they are pounding treasuries. 2 year futures down 12 ticks.

  3. By Fullcarry on Sep 7, 2008 | Reply

    Down 16 ticks now.

  4. By Shankar Khadye on Sep 7, 2008 | Reply

    Yes, the treasuries will get pounded, so in order to drive everyone into treasuries, the Fed will squeeze liquidity and drive everyone back into them. And there you have your stock market sell-off continuing. Else, the US Government borrowing costs go up through the roof.

    And this will create the largest asset bubble known to man – US Treasury bubble. Just wait for a few months (or a couple of years) and this will blow. You think housing bubble is bad, you probably haven’t seen much yet.

    – Shankar

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