Treasuries Bust a MOVE

In the midst of the false equity market euphoria around 10:30 a.m. Eastern time on Friday, the realization that the smart money, aka, the bond market was moving in the wrong direction. Institutions and probably some foreign entities were selling the US Treasuries off and the US 10 year bond suddenly had a yield back above 4.30%.

That’s a big “whoopsies” which was overlooked by the ‘Happy Days are Here Again’ crowd singing about the false floor being built under the stock market.

Have no fear my friends, the stories were already in place from the media because by God we have to bury this cat turd before the election!

US labor market staggers after blow from hurricanes, strikes – Reuters

Weak US jobs report confirms Fed has increasing room to cut rates – ING Think

October jobs report was a ‘head fake.’ Look at these numbers instead before Election Day – Marketwatch

Employment data in the US is affected by hurricanes – MSN

And on and on and on it goes. I’ll dissect and destroy the “hurricane” propaganda in my Sunday night special report for MacroEdge.net.

But the bond market dissected the BLS non-farm payroll report and blew it up immediately. Look at the reaction in the chart above and start to think; why such a short, sudden and violent move back to higher yields?

First a little history to help understand this destruction in the full faith and credit which may well be underway.

From the time of World War I on through the Great Depression and 1970’s bond market crash, people have always treated the US government’s ability to manage its own affairs with great suspicion.

The magic number for everyone to freak out about is a US 10 year Treasury yield north of 8.0%. An extremely unlikely event because of the series of financial events it would trigger creating a crash of monumental consequence across American society and the banking system.

There are warnings however of volatility and instability in our bond market which is tracked by the BOAML (Bank of America/Merrill Lynch) MOVE index:

Thus far any volatility building in the US financial system has been slopped over with gravy or make up on the pig to maintain the appearance of full faith and credit.

Meanwhile, one of the largest individual investing firms in America, Berkshire Hathaway, has demonstrated their faith in the stability of the banking system by doing what?

Billionaire Warren Buffett Sold 26% of Berkshire’s Stake in Bank of America and Is Piling Into a Financial Juggernaut That’s Soared 33,000% Since Its IPO

If the banking system is so stable, why would a firm sell 26% of its investments in one of the top five holding companies in the Federal Reserve as a shareholder and hold cash or speculate elsewhere?

For those who scream equities are the answer, the very smart money which follows the most intelligent money took advantage of the bond sell-off on Friday and liquidated equities, aka, distribution as the S&P 500 demonstrated despite the promise of a lower Fed Funds rate due to the employment report.

While the one day chart looked promising, the chart for the week was a disaster:

Something is gravely amiss and there are signs everywhere as yours truly reads the geek talk about the underlying conditions of the banking system heading into the election. Stay tuned as this nightmare has more wild twist and turns of which will impact everyone no matter who wins this election on Tuesday.

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