Fed monkeyApparently the Fed cannot have its cake (taper) and eat it too (maintain its iron-fisted control over interest rates) as the 10 year treasury bond has just hit 3%- a 52 week high and up 20% from its October lows under 2.5%.
Is the Fed beginning to lose control of the bond market (along with the correlated $600 Trillion IRswaps derivatives market)?



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3.000 Up 0.0130(0.44%) 11:05AM EST

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Day’s Range: 2.9810 - 3.00
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    • Haha, exactly. 3.02 is getting past the parabolic blip, and on into the basement of the new normal. Over 3.00  is big. Dont forget, the 100s of Trillions in Interest Rate Swaps, with the Banks taking the ”variable”. Doesnt take much of a butterfly move to shift this upside down Pyramid. Surprized ZH hasnt commented on it. Funny the USDX is staying low at the same time. Once it simultaneously crashes through 79, its hyper-stagflationary showtime! And parabolic, no-physical-to-be-had gold-time!

  1. I wouldn’t get too excited about a 3% on the 10 year, 3.75-4.5% gets a little more interesting but that’s a long way off.   The interest payments on the debt still remain very small despite the total debt ($17 trillion).   Rates would need to go up much higher before the interest payments became on serious issue, and the inflation is just not there to get higher rates.

    • Nice try again Zman; actually not really. Haha. We’re not interested in servicing the debt yet. That is a broader issue, which remains in the backdrop and essentially ensures low rates are here to stay indefinitely, via QE (See Japan) but did you think to consider the impacts of 3%+ rates on the all-important housing market, and car loans — very significant areas for boosting economic “growth”.

    • ZMan, we understand who pays your bills, but cmon…. No one here is buying it anymore!  Its getting harder and harder to shovel that crap anymore!

    • @ Silversavings
      The impact of higher rates (3-4% on the 10 year) on the general economy?    Not much at this point, 90% of the credit creation is auto loans (government backed), and student loans (government backed).   So what difference will higher rates have on housing?   Some for sure, but real estate transactions are still a small part of economic activity since 2007, they are not going to built new homes, commercial properties, or anythng else for years and decades.
      Higher rates can’t hurt the economic activity that doesn’t exist today, or won’t exist in the future.

    • @ Pat Fields
      “Seems your intake of psychedelics has had terminal effect”      There is no evidence that past usage of LSD, magic mushrooms, and a few other mind opening chemicals have a negative impact on cognitive skills.
      As far as future liabilities are concerned, don’t worry about it, promises get broken all the time, and SS and medicare will be no different.   They are not going to print 10′s of trillion of dollars to make good on it, citizens will get stiffed and life goes on.

    • zman,
      Provide me with a link to those bogus assertions. So much of this phony recovery has been juiced by unprecedented low rates, it’s not even funny. To say that rising rates would not have a deleterious effect on this facade is very difficult to defend.

    • @zman,
      All you have to do is look at recent history to see that you are pulling arbitrary numbers out of your arse. The 10 yr moving to 5.1% was enough to pop the housing bubble, precipitating the financial crisis. Yes, 5.1% was the HIGH during the previous expansion from the middle of 2003 to the end of 2007. More importantly the 10y yield BOTTOMED in June 2003 at only 3.1%. So only a 200 basis point move from 3.1% to 5.1% over a four year period was sufficient to pop the last bubble. This expansion saw the 10yr bottom at 1.41. A 200 basis point move would be to 3.41%, only 41 basis points from the current level. And yes, that means the importance is in the relative move with respect to the previous bottom. Because rates were significantly lower during this expansion it will take a lower move in overall magnitude to inflict a serious economic shock. In other words, this economy is more dependent on even lower rates than the period from 2002-2007. Secondly that article is completely inadequate to support your claim. Car loans are at elevated levels due to ridiculously low borrowing requirements, thanks to huge speculator demand for sub-prime loans (AGAIN). You know what was driving this demand? LOW RATES. You know what kills this demand?? Higher rates.

      Much of the same can be said about the housing market. Except here, even smaller moves in rates significantly affect affordability. See how much a 25 basis point move affects a $300,000 mortgage…And for the record, homes sales were at a 5 yr high last month. If incomes remain stagnant and real unemployment high while rates continue up, there will be major problems in the housing market (AGAIN). Something has got to give.


    • No. The bond market absolutely dwarfs the the silver market. You can’t even compare the two. Even if you did believe that, why would 3% be the magic number? Why wouldn’t the fed hold rates below 2% if it was “omnipotent”?

    • Was just asking a question.  Obviously ‘Mammoth’ does not refer to the size of my brain.
      And that is why I stick with stacking, farming, and building skills.
      Because bonds and other paper instruments just do not stick with me.

  2. :) I know I don’t post much these days but, who are you ZMan? I’m sure you are capable of math so, use 0.0001 on 17 Tr, 90 Tr, 200 Tr. etc. and see what kind of extra Moolah is required. Remember, China already don’t give a rats butt what the inflation is here, only that we pay our bill to them + interest. LMAO!

  3. The rate is rising selling is the cause, The Fed does not have the horsepower to really move the rate down any longer. There are many reasons for the rate to rise, I would venture to say, mainly the cause comes from selling  outside U S borders?

    • “ZMAN is like a stuck needle on a record. All very predictable and oh so boring. I really don’t know why he bothers any more”

      zwomantroll@i_luv_tom_brady.cia.gov comes here for the same reason you show up at work. For $$$$$$$$$.

      ZMAN is a Cass Sunstein/Obombass administration paid troll.
      “Cass Sunstein, the Regulatory Czar, had suggested, in a 2008 paper, that government agents, or allied groups, infiltrate and undermine groups that spread “conspiracy theories.”

      In a 2008 academic paper, President Barack Obama’s appointee to head the Office of Information and Regulatory Affairs advocated “cognitive infiltration” of groups that advocate “conspiracy theories” …….

      Cass Sunstein, a Harvard law professor, co-wrote an academic article entitled “Conspiracy Theories: Causes and Cures,” in which he argued that the government should stealthily infiltrate groups that pose alternative theories on historical events via “chat rooms, online social networks, or even real-space groups and attempt to undermine” those groups. ” 1

      1 http://conservativehideout.com/2010/01/17/czar-wars-trolls-cass-sunstein-advocates-“cognitive-infiltration”-of-groups/

      Another article describing what job ZMAN is paid to do: Obama Information Czar Outlined Plan For Government To Infiltrate Conspiracy Groups: “Put into English, what Sunstein is proposing is government infiltration of groups opposing prevailing policy,” 2

      2 http://www.prisonplanet.com/obama-information-czar-outlined-plan-for-government-to-infiltrate-conspiracy-groups.html

      To read about the fine details of the implemented version of the government infiltration
      program, check out the following link:


  4. Canadian Dirtlump Lump  You have accomplished something never achieved in the annals of history.
      You’ve quantified the value of a Nobel Laureate
    Lower lights 
    Thomas Friedman  12 BPS
    Krugman   5.5BPS
    Zman   .01 BPS
    The price of idiocy and the prizes accorded said idiocy are a low bar. 
    The last time UST 10 yr hit 3%, the value of the notes held by the Fed lost about $130-160 billion in value.  The Federal Reserve Bank is bankrupt and about to be double dipped in bankruptcy.  For those who want to know, the median rate for UST 10 yrs over the last 210 years is 5%.  That rate will destroy the IR swaps, ushering in a collapse of bonds and all banks. 
    Zman,  you need to earn your paycheck  Kindly up the quality of your posts.  Sumkid has better critical thinking than you.  3rd Grade math is not your suit  Read Jim Willies Hat Trick Letter if you want to get a stark and clear view of the world today, particularly that of the IR Swaps and derivatives market as it exists today.
    The nominal interest costs of the national debt can be paid from 3 months of QE but that’s not the point. The direction and speed at which events can unfold and bad things unravel is the important matter.  The $1 trillion dollars of deficit spending could easily his $2 trillion if tax revenues drop and spending increases   Both are scheduled to happen in 2014.
    Hello back to you 2 OZ good to see you on board. Lot’s has happened since you last posted but it’s clear to take a look on SD from time to time
    Duckvision–hola and felicitations. Your posts and videos, along with those of Idaho eagle, are refreshing and instructive.

    • “For those who want to know, the median rate for UST 10 yrs over the last 210 years is 5%.  That rate will destroy the IR swaps, ushering in a collapse of bonds and all banks.”
      Some of us already know this.  ;-)
      Be that as it may, if the IR swaps fail, they will detonate ALL derivatives as banksters and other low-lifes madly scramble for anything they can liquidate… and the demands for derivative payments will pour in like sea-water into the Titanic… and with about the same effect… a long fast plunge into the icy depths of oblivion.

  5. PS Zman  get a clue on interest rates and how they affect the US economy.  70% of the economy is the consumer.  Consumers who buy homes buy massive amounts of consumer goods, create families and contribute more to economic stability than any other force in the world. The ownership of private property is thelinch pin to our Constitutional freedoms and economic well being.
    Cars sold at subprime rates and students loans will do little more than bankrupt those who ensnared by those loans, either owning a rapidly depreciating asset or a loan that guaranties nothing in the way of economic prosperity.  35% of the students and young people under the age of 26 are still living with mom and dad.  That is not a key to a growing economy.  Home building, contruction, lending on homes and the pride of ownership are those keys.  If we do not encourage and support home ownership this country will turn into a nation of renters and that is the hallmark of socialism.  This is not only my assertion, it’s supported by many of my friends in banking who can see these trends shaping up over the next two years.  It is difficult at least to qualify for a home loan now.  In 2014 it will be increasing difficult and nigh un to impossible for the Average Joe
    I suppose you rent but if you don’t, please tell me how much you look forward to paying more your your paycheck to the lender when rates hit 5%
    By the way those holding car loans and student loans will soon find their lives changed dramatically.  many states now have debtor prisons lined up for fines, tolls, regulatory issues and non payment of loans and credit cards with terms ranging from 2 weeks to 6 months for obligations as little as $200 and up to $4,000.   Student loans are not dischargeable through bankruptcy.  The Congress just raised student loan rates over 6%.
    If your not living with mom, encumbered by a student loan, a car loan or large credit card debt and have a steady paycheck, you are set.  Judging from yor posts, you fail in some key elements of those items above.  Good luck. Just don’t let your boss know you are bad at math or incompetent in your posts. 

  6. I liken the bond market to an earthquake fault line, if the 10yr yield holds at 3% and moves higher in the coming days – weeks, the pressure exerted on interest rates will be unsustainable. A rupture in the bond market is imminent. I also think they don’t want this or will allow this to happen so……
    This is my theory….. The ‘wonderful’ people at the Fed allowed a tiny taper to stress the bond market. Knowing this would lead to a sell off in bonds sending the yield on the 10yr, in particular, higher. Then after allowing a little market rumblings will be able to come out and justify to the people why QE must be raised again, implying the economy was not strong enough yet for a permanent taper.
    My prediction is, if the yield stays at 3% or above QE will go over 100 billion a month or more.
    but hey I could be superbly wrong!!!!!!! 

    • “… if the yield stays at 3% or above QE will go over 100 billion a month or more.”
      Since the Fed is not independently audited, their QE could already be at $100B a month… or more.  How would we know?  All we have is the info that they choose to provide.  But, hey… would they lie?  Nahhhh…  lol

  7. Juicy Julie
      I think you have it right on.  Rates are incredibly important to the economy 
    Like inflation, taxes, regulations and foolish government mandates, the interest burden on a company or individual or even a state or city can make that entity TOTALLY INSOLVENT AND ILLIQUID overnight if rates go past a tipping point. 
    Wham–interest becomes unaffordable. Detroit?
    From there evolves major economic failures
    The lenders will not take a hit, however, as they will be bailed-in as the costs are borne by the depositors.
    QE to the rescue. $100 billion is a good start.

    • “The lenders will not take a hit, however, as they will be bailed-in as the costs are borne by the depositors.”
      Depositors?  What depositors?  There are no more depositors.  All I can see is a sea of “unsecured lenders”.  :-O

  8. @Mammoth,

    I didn’t mean for my comment to be taken that way. I didn’t mean for it to seem disparaging; I can see why you took it that way and I apologize…

    By the way, I have a great deal of interest in farming, yet I don’t know a damn thing about it. If I could take some of my knowledge and shift it over to farming, I certainly would…

  9. widget and strannick
    10 yr treasuries over 3%   yep, hold on   things could get interesting. Nothing like a long holiday week to allow monkeyshines to abound. trading in gold and silver, giving higher prices, will probably see a quick reversal downward.

  10. to the Doc:
    Please consider offering zman official SD contributor status.
    As interesting as his posts are, nothing tops the regulars’ remarks following one of his comments for pure entertainment value.

    • Sorry AG. Forgot that giving zman contributor status would put him in an esteemed cadre that includes yourself. 
      Perhaps instead some sort of honorarium would be in order, similar to the way KLUMMAC received a honorary jurisprudence degree
      last summer, though many find that award ironic given his interpretation on various points of constitutional law.
      BTW, I always look forward to reading your perspectives on banking, metals and certain finished metal goods as I am somewhat of a newb in that final area. 
      Best to you in the upcoming year.

  11. Junkman
    I am not sure I’m in an esteemed status. 
    ‘ Steamed’  maybe.  But then my posts give me away
    Honorarium  rhymes closely with sanitorium, planetorium, cryptosporium and pandemonium.  Close enough for those who warrant that emolument.   KLUMMAC would fit any one of them.  Cheers

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