Bondsanity!!!

Long day.  Finally back home.  I had to laugh watching the credit markets today.  They played the old school/1970's style bond game today that I talk about on here often.

Let's look at the 10 year trading this week:

Meanwhile, the European debt markets were crashing as it appears Ireland is rapidly turning into another Iceland as their banks implode.  Irish 10 year debt yields rose to 8.5%:

Quick Take:

The bond boys made a fortune in the US treasury market.  They sold off the bond yields all week as the world prepared for a potential 30 year bond sale disaster.

The auction got done(albeit not impressively) as the primary dealers loaded up on the 30 year bonds to complete the auction.

News of the completed auction was announced with great relief to the world.  10 and 30 year bonds rallied hard as a result.  The primary dealers were then able to dump these bonds(as well as others that they bought heading into the auction) at a huge profit after the jump following the "good" auction news. 

Folks, we saw a 1.5 point trading spread on the 10 year today.

This price action today in treasuries was beyond crazy!  It was BONDSANITY!

The traders are laughing all the way to the bank tonight as they once again played their bond game to perfection.  This is why I didn't get involved in TBT heading into the auction today.  I was not surprised to see how things went down.

That being said, TBT is now looking much more attractive after the huge rally in bonds.  I'll sit back for a few more days and watch.

The reason I'll be patient here is because Europe's debt markets are on the cusp of a major blow up. A detonation of one of the PIIGS would trigger a huge capital flight to safety from Europe into the US bond markets as well as the US dollar.  This is an easy way to get gutted shorting T's.

The Euro could very well sell off versus the USD if they can't gain control of this situation.

Unprecedented times my friends.  I will be back to more normal postings now that I am back.

Best,

J