the key is in the long end of treasuries(by boo boo bear)

the key is in the long end of treasuries.

As everyone knows, the boom is announced by falling long rates and rising short rates.

Conversely credit contraction is rising long rates, and falling short rates. Hence the connection to the treasury curve.

Itwas during the boom that all the "creditors" got in on the borrow shortto lend long game. This became so overplayed it drove the yield up onthe short end. It is in this end of the game that the vast majority ofinterest rate derivatives were written.

When one inspects the"borrow short to lend long" game, we see that the credit default swapsbegan very early, in the mid nineties, primarily as insurance forbanks. It is these CDS's that went exponential in the 2002 thru 2007era. And for them to go exponential, bond issues and loan writings hadto go exponential.

These credit default swaps are now 10 times the corporate bond market. The CDS's out exponentialed the exponentialed.

These were written during the boom. Borrow short to lend long.

Thereversal in the treasury yield curve occurred in February 2006. And themantra is that a bull lasts no longer than 12 to 16 months after that.This concurs with today.

It was this reversal that announcedcredit contraction oncoming. The end of the borrow short to lend longgame was soon to come. Get your books in order.

But instead, wesaw the opening of the European iTraxx in January 2007, along with theiBoxx. Attempting to insure what cannot be insured.

Not only wasmore and more debt being offered, but it was being leveraged thru thecredit default market that insures these debt offerings.

What wesaw prior to the crash in late February and mid July was the 10 yearand 30 year merging in yields. Exploding upwards. This signaledimpending implosion, and the 3month tbill fell from 4.94 yield to2.60%. Stocks immediately imploded.

Today, the battle isobvious. Get that 10 year down. The 30 year will follow. It is obviousthat it is these two that are igniting the dynamite beneath the system.

Thecats out of the bag. And everybody knows it. The key now is how to getmy price and get out before every hillbilly heads for the exit. To doso, stocks have to be kept up.

All attempts are being made todrive the dollar down to inflate stocks. Folks are buying governmentissue as a safe haven. It is in effect propping the dollar.

Thiscan't last, because it's forcing capital out of the corporate bondmarket. The corporate bond market/commercail paper market will becomeilliquid.

Hence the need to play for time. Drive that long enddown, and bail the corporates. Those corporates are supported by stockcollateral.
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To support the corporate bond market stocks must rise. When that happens, the Long end of the bond market takes off.

It will be the long end that finally ends the bull once and for all.