Published Thu, 06 Dec 2018 08:52:47 -0500 on Seeking Alpha
Operation Twist - Redux 2 If we examine this year’s Treasury auctions compared to last year, we see from days gone by an interesting reincarnation of "Operation Twist." We are seeing:
The 2 and 3-year Treasury issuance growing at ~30 percent, The belly of the yield curve growing at less than 10 percent, The Long End growing at > 20%
So what is going on here?
The Gross Misinterpretation - "The Yield Curve has Inverted" We immediately find ourselves reading headlines from the news sources that The Treasury yield curve just inverted, sounding the alarm for recession. An inverted yield curve immediately triggers the conclusion that we are not only now late in the credit cycle but may potentially already be in the early stages of the long overdue and highly anticipated recession. Everyone reacts accordingly. But is this in fact what the yield curve inversion is signaling?
We suspect what we are realistically witnessing a massive bond short squeeze. We warned of this problem on 04/28/18.
What is occurring is that futures traders are seeing an opportunity to take profits on their massive short positions and re-balance portfolio exposure.
What ignited their actions was last week's speech by Fed Chairman Jerome Powell. The trading community specifically focused on Powell's statement: “we will remain just below the broad range of estimates of the level that would be neutral for the economy." They found it very... Read more
|Stock name||Last trade||P/E||Earnings/Share||Dividend/Share||Dividend yield|
|SPDR DOW JONES INDUSTRIAL AVERAGE ETF TRUST||265.92||0.0||0.00||5.42||2.05|
|SPDR S&P 500 ETF||292.23||0.0||0.00||5.24||1.80|
|PROSHARES ULTRASHORT S&P 500||31.23||0.0||0.00||0.00||1.16|
|PROSHARES ULTRAPRO SHORT S&P 500||28.66||0.0||0.00||0.00||1.16|
|POWERSHARES QQQ TRUST SERIES 1||189.71||0.0||0.00||1.45||0.77|
Older articles featuring Spdr Dow Jones Industrial Average Etf Trust (DIA):Of Slopes And Flops: The Yield Curve Inversion
InvestED: Ep. 207- Inverted Yield Curve
March 2019 Yield Curve Update
When A Yield Curve Inversion Means Recession
Ignore The Yield Curve, They Said...
Is The U.S. Yield Curve Signaling A U.S. Recession?
Right-Side Up Again? The Latest On The U.S. Treasury Yield Curve
Market Update: Yield Curve Focus
Short And Sharp: Yield Curve Inversion - A False Positive?
Is An Inverted Yield A Harbinger Of Bad News?