Bond Market Braces For $ 1 Trillion Tsunami Of Treasuries This Year

[g5000]

An inverse floater is a bond or other type of debt whose coupon rate has an inverse relationship to a benchmark rate. An inverse floater adjusts its coupon payment as the interest rate changes. When the interest rate goes up the coupon payment rate will go down because the interest rate is deducted from the coupon payment. A higher interest rate means more is deducted, thus less is paid to the holder.

Inverse Floater

Looks like these borrowers will have a lower interest expense if rates rise.
Sounds awful!

Wrong.

The buyers of the inverse floaters will take a huge loss. That's why it is called an INVERSE floater, tard.

Just like 1994.

Wrong.

The buyers of the inverse floaters will take a huge loss.

And the sellers will have a gain, moron.

See post 32, tard.

If I issue a bond that currently has a 5% coupon and the coupon goes down to 4%,
the buyer lost 1% a year, I saved 1% a year.

Could you know less about this stuff? It'd be difficult.

You are so far behind the times it is hilarious.

Were you in a coma in 2008?

Do you even know what a credit default swap is?

 

[Doc1]

Oh, another thing about derivatives.

They are pretty much unregulated. They aren't traded on regulated exchanges so that if one party goes under due to suffering extreme losses , the other parties can still be compensated. This means there is tremendous counterparty risk. And during a crash, that causes seizures.

The derivatives chain is so complex, no one knows what other parties are fucked and which ones aren't. Trust collapses. Liquidity freezes up.

See: 2008.

See 2018

 

[g5000]

g5000

Who issues these Bonds?

Corporations, nations, sovereigns, municipalities, states.

 

[Toddsterpatriot]

An inverse floater is a bond or other type of debt whose coupon rate has an inverse relationship to a benchmark rate. An inverse floater adjusts its coupon payment as the interest rate changes. When the interest rate goes up the coupon payment rate will go down because the interest rate is deducted from the coupon payment. A higher interest rate means more is deducted, thus less is paid to the holder.

Inverse Floater

Looks like these borrowers will have a lower interest expense if rates rise.
Sounds awful!

Wrong.

The buyers of the inverse floaters will take a huge loss. That's why it is called an INVERSE floater, tard.

Just like 1994.

Wrong.

The buyers of the inverse floaters will take a huge loss.

And the sellers will have a gain, moron.

Christ Almighty, were you in a coma in 2008? Were you an infant or not yet born in 1994? 1998?

Bond buyers have capital gains in a falling rate environment and capital losses in a rising rate environment.

Did you fail Econ 101 every time you took it?

 

[Doc1]

g5000

Who issues these Bonds?

Corporations, nations, sovereigns, municipalities, states.

g5000

Who issues these Bonds?

Corporations, nations, sovereigns, municipalities, states.

Specifically within your thread here "Treasury" bonds are issued by whom?

 

[g5000]

Here's another thing about derivatives.

I can bet on you defaulting on your mortgage.

I can't buy fire insurance on your house, for obvious reasons. Arson would skyrocket.

I can't buy life insurance on your life, for obvious reasons. Murder for hire would skyrocket.

This is why insurance requires what is called an "insurable interest". I have to have something to lose.

However, CDS do not have an insurable interest requirement.

So I can bet on Russia defaulting on their bonds even though I don't own any.

Everyone on Earth can bet on Russia defaulting on bonds. For all you know, your 401k has done exactly that.

Your 401k manager has "aggressive" funds and non aggressive funds. If you want to be safe, you are told to invest in bond funds.

Well, guess what? Read the fine print. Your 401k bond fund invests in bond DERIVATIVES.

Anyway.

Let's say Russia issues $50 billion in bonds.

I can buy a CDS, you can buy a CDS, your 401k manager can buy a CDS. We can all buy a $50 billion insurance policy.

Now let's say Russia defaults on all $50 billion.

Quiz time: How much wealth is wiped out?


If you said "$50 billion", WRONG!

Not only do all the holders of that $50 billion in bonds lose. All the sellers of the swaps against those bonds lose $50 billion.

Now you and I and your 401k manager, and everyone else on the planet, rush to collect our $50 billion. For a total of...ohhhhhh...$20 trillion say.

Oopsie! The guys who sold us those CDS don't have $20 trillion.

Sorry, suckers!

Implosion.

That is how a $50 billion default can kill the planetary economy.

That is how the subprime mortgage bubble killed the planetary economy.

Without derivatives, it would have been a hiccup. Totally manageable.

 

[Toddsterpatriot]

Dipshits misspelled Treasuries: Bond market braces for $ 1 trillion tsunami of Treasurys this year

Trump's Tard Herd has been deliberately kept in the dark to the fact that Trump ran up $666 billion in new debt last year. That's the highest deficit of any President in American history other than Obama.

And now, another trillion is about to hit the fan.

You see, pseudocons think if you keep adding more to your credit card, your payments don't have to go up.

In fact, Trump just lowered their credit card payment (tax "reform").

What we have here, ladies and gentlemen, is a Ponzi scheme. Trump is issuing debt (borrowing) to pay off the national credit card!

I shit you not.

The tax "reform" transferred $1.5 trillion of debt to our unborn descendants.

As if that isn't a big enough clusterfuck, at today's yields there probably isn't enough demand for Trump's trillion dollar treasuries.

So interest rates will have to rise to entice our enemies to loan us more money.

There are an astronomical number of financial derivatives which will implode if that happens. Derivatives with face values approaching triple digit trillions.


“If demand for U.S. fixed income doesn’t double over the coming years then U.S. long rates will move higher, credit spreads will widen, the dollar will fall, and stocks will likely go down as foreigners move out of depreciating U.S. assets,” said Torsten Slok, chief international economist for Deutsche Bank, in a note.


I warned you. I told you the last time the GOP controlled the whole government they spent like drunken sailors in a whorehouse.

This is one of the reasons why we will be in a recession by this time next year.

Yeah. Probably not this year.

But you never know. Someone's derivatives could explode (a la Bear Stearns and Lehman Brothers) and light the fuse sooner.

Someone's derivatives could explode (a la Bear Stearns and Lehman Brothers)

Bear Stearns and Lehman's collapse had nothing to do with derivatives.
Both firms carried huge bond portfolios, many of them mortgages, financed with overnight loans.
When the bond prices started to decline, their banks no longer wanted to roll over their loans.
They couldn't liquidate their positions without taking further losses.
Bear was bought by JPMorgan, with a Federal Reserve guarantee, Lehman went under.

 

[g5000]

g5000

Who issues these Bonds?

Corporations, nations, sovereigns, municipalities, states.

g5000

Who issues these Bonds?

Corporations, nations, sovereigns, municipalities, states.

Specifically within your thread here "Treasury" bonds are issued by whom?

The Treasury. Duh.

 

[g5000]

Dipshits misspelled Treasuries: Bond market braces for $ 1 trillion tsunami of Treasurys this year

Trump's Tard Herd has been deliberately kept in the dark to the fact that Trump ran up $666 billion in new debt last year. That's the highest deficit of any President in American history other than Obama.

And now, another trillion is about to hit the fan.

You see, pseudocons think if you keep adding more to your credit card, your payments don't have to go up.

In fact, Trump just lowered their credit card payment (tax "reform").

What we have here, ladies and gentlemen, is a Ponzi scheme. Trump is issuing debt (borrowing) to pay off the national credit card!

I shit you not.

The tax "reform" transferred $1.5 trillion of debt to our unborn descendants.

As if that isn't a big enough clusterfuck, at today's yields there probably isn't enough demand for Trump's trillion dollar treasuries.

So interest rates will have to rise to entice our enemies to loan us more money.

There are an astronomical number of financial derivatives which will implode if that happens. Derivatives with face values approaching triple digit trillions.


“If demand for U.S. fixed income doesn’t double over the coming years then U.S. long rates will move higher, credit spreads will widen, the dollar will fall, and stocks will likely go down as foreigners move out of depreciating U.S. assets,” said Torsten Slok, chief international economist for Deutsche Bank, in a note.


I warned you. I told you the last time the GOP controlled the whole government they spent like drunken sailors in a whorehouse.

This is one of the reasons why we will be in a recession by this time next year.

Yeah. Probably not this year.

But you never know. Someone's derivatives could explode (a la Bear Stearns and Lehman Brothers) and light the fuse sooner.

Someone's derivatives could explode (a la Bear Stearns and Lehman Brothers)

Bear Stearns and Lehman's collapse had nothing to do with derivatives.

Oh they most certainly did!

I guess you really were in a coma.

 

[g5000]

In April 2007, bond dealers told the managers of two Bear Stearns hedge funds that they should write down the value of their assets. The funds, High-Grade Structured-Credit Strategies Fund and its brother Enhanced Leverage Fund, owned $20 billion in collateralized debt obligations. These derivatives were, based on mortgage-backed securities. They started losing value in September 2006 when housing prices began falling.

How a Bank That Survived the Depression Started the Great Recession

 

[g5000]

Here's how we got to $20 trillion of debt: "Gimme gimme gimme, and make that guy over there pay for it."


Look in the mirror.


There's your culprit.

Not the Fed. Not the Mexicans. Not the blacks. Not the Republicans. Not the Democrats.

 

[Toddsterpatriot]

Oh, another thing about derivatives.

They are pretty much unregulated. They aren't traded on regulated exchanges so that if one party goes under due to suffering extreme losses , the other parties can still be compensated. This means there is tremendous counterparty risk. And during a crash, that causes seizures.

The derivatives chain is so complex, no one knows what other parties are fucked and which ones aren't. Trust collapses. Liquidity freezes up.

See: 2008.

Oh, another thing about derivatives.

They are pretty much unregulated.

Some are, some aren't.

They aren't traded on regulated exchanges

Every option and futures contract traded on a US exchange is a derivative.
You should probably look up the definition, you'll sound less like a moron. Maybe.

 

[Toddsterpatriot]

Looks like these borrowers will have a lower interest expense if rates rise.
Sounds awful!

Wrong.

The buyers of the inverse floaters will take a huge loss. That's why it is called an INVERSE floater, tard.

Just like 1994.

Wrong.

The buyers of the inverse floaters will take a huge loss.

And the sellers will have a gain, moron.

See post 32, tard.

If I issue a bond that currently has a 5% coupon and the coupon goes down to 4%,
the buyer lost 1% a year, I saved 1% a year.

Could you know less about this stuff? It'd be difficult.

You are so far behind the times it is hilarious.

Were you in a coma in 2008?

Do you even know what a credit default swap is?

Do you even know what a credit default swap is?

Better than you, obviously.

That is a low bar though. LOL!

 

[g5000]

The Republicans and Democrats are acting rationally.

The American people have made it very clear that if our politicians do not give them the gifts they demand, they will find someone who will.

"Those other politicians spend too much on PORK, but my guy brings home the BACON!"

 

[g5000]

Oh, another thing about derivatives.

They are pretty much unregulated. They aren't traded on regulated exchanges so that if one party goes under due to suffering extreme losses , the other parties can still be compensated. This means there is tremendous counterparty risk. And during a crash, that causes seizures.

The derivatives chain is so complex, no one knows what other parties are fucked and which ones aren't. Trust collapses. Liquidity freezes up.

See: 2008.

Oh, another thing about derivatives.

They are pretty much unregulated.

Some are, some aren't.

They aren't traded on regulated exchanges

Every option and futures contract traded on a US exchange is a derivative.
You should probably look up the definition, you'll sound less like a moron. Maybe.

Options and futures are a subset of derivatives.

And only commodity options and futures are traded on exchanges. Not all options and futures are. Trillions are traded over the counter.

The biggest subset of derivatives, by far, are interest rate swaps. And those are not traded on exchanges.

 

[g5000]

Wrong.

The buyers of the inverse floaters will take a huge loss. That's why it is called an INVERSE floater, tard.

Just like 1994.

Wrong.

The buyers of the inverse floaters will take a huge loss.

And the sellers will have a gain, moron.

See post 32, tard.

If I issue a bond that currently has a 5% coupon and the coupon goes down to 4%,
the buyer lost 1% a year, I saved 1% a year.

Could you know less about this stuff? It'd be difficult.

You are so far behind the times it is hilarious.

Were you in a coma in 2008?

Do you even know what a credit default swap is?

Do you even know what a credit default swap is?

Better than you, obviously.

That is a low bar though. LOL!

No, you clearly have no clue.

You claimed they were zero sum. About as wrong as wrong can be.

 

[Toddsterpatriot]

Here's another thing about derivatives.

I can bet on you defaulting on your mortgage.

I can't buy fire insurance on your house, for obvious reasons. Arson would skyrocket.

I can't buy life insurance on your life, for obvious reasons. Murder for hire would skyrocket.

This is why insurance requires what is called an "insurable interest". I have to have something to lose.

However, CDS do not have an insurable interest requirement.

So I can bet on Russia defaulting on their bonds even though I don't own any.

Everyone on Earth can bet on Russia defaulting on bonds. For all you know, your 401k has done exactly that.

Your 401k manager has "aggressive" funds and non aggressive funds. If you want to be safe, you are told to invest in bond funds.

Well, guess what? Read the fine print. Your 401k bond fund invests in bond DERIVATIVES.

Anyway.

Let's say Russia issues $50 billion in bonds.

I can buy a CDS, you can buy a CDS, your 401k manager can buy a CDS. We can all buy a $50 billion insurance policy.

Now let's say Russia defaults on all $50 billion.

Quiz time: How much wealth is wiped out?


If you said "$50 billion", WRONG!

Not only do all the holders of that $50 billion in bonds lose. All the sellers of the swaps against those bonds lose $50 billion.

Now you and I and your 401k manager, and everyone else on the planet, rush to collect our $50 billion. For a total of...ohhhhhh...$20 trillion say.

Oopsie! The guys who sold us those CDS don't have $20 trillion.

Sorry, suckers!

Implosion.

That is how a $50 billion default can kill the planetary economy.

That is how the subprime mortgage bubble killed the planetary economy.

Without derivatives, it would have been a hiccup. Totally manageable.

Now let's say Russia defaults on all $50 billion.

Quiz time: How much wealth is wiped out?


If you said "$50 billion", WRONG!

The owners of the bad Russian bonds will lose some or all of the $50 billion.
How much wealth do you think is wiped out?

For a total of...ohhhhhh...$20 trillion say.​

​

Oopsie! The guys who sold us those CDS don't have $20 trillion.​

You think his failure to pay out $20 trillion wiped out $20 trillion in wealth?
That's funny. And by funny I mean wrong.
​

That is how the subprime mortgage bubble killed the planetary economy.​

Bullshit. The economy was damaged by too many houses being sold to too many bad risks who defaulted.
Banks lost trillions, pulled back on lending. Hard to expand an economy without new lending.
Nothing to do with idiots at AIG selling too many CDS with too few reserves.​

 

[g5000]

2008 proved with dramatic effect that credit default swaps are NOT a zero sum game.

 

[g5000]

Oopsie! The guys who sold us those CDS don't have $20 trillion.

You think his failure to pay out $20 trillion wiped out $20 trillion in wealth?
​

Nope. It wipes out whatever the sellers of CDS have in their reserves. Then the counterparties go begging to the government for the rest.

See: AIG.

And you thought they were zero sum!

 

[Toddsterpatriot]

Dipshits misspelled Treasuries: Bond market braces for $ 1 trillion tsunami of Treasurys this year

Trump's Tard Herd has been deliberately kept in the dark to the fact that Trump ran up $666 billion in new debt last year. That's the highest deficit of any President in American history other than Obama.

And now, another trillion is about to hit the fan.

You see, pseudocons think if you keep adding more to your credit card, your payments don't have to go up.

In fact, Trump just lowered their credit card payment (tax "reform").

What we have here, ladies and gentlemen, is a Ponzi scheme. Trump is issuing debt (borrowing) to pay off the national credit card!

I shit you not.

The tax "reform" transferred $1.5 trillion of debt to our unborn descendants.

As if that isn't a big enough clusterfuck, at today's yields there probably isn't enough demand for Trump's trillion dollar treasuries.

So interest rates will have to rise to entice our enemies to loan us more money.

There are an astronomical number of financial derivatives which will implode if that happens. Derivatives with face values approaching triple digit trillions.


“If demand for U.S. fixed income doesn’t double over the coming years then U.S. long rates will move higher, credit spreads will widen, the dollar will fall, and stocks will likely go down as foreigners move out of depreciating U.S. assets,” said Torsten Slok, chief international economist for Deutsche Bank, in a note.


I warned you. I told you the last time the GOP controlled the whole government they spent like drunken sailors in a whorehouse.

This is one of the reasons why we will be in a recession by this time next year.

Yeah. Probably not this year.

But you never know. Someone's derivatives could explode (a la Bear Stearns and Lehman Brothers) and light the fuse sooner.

Someone's derivatives could explode (a la Bear Stearns and Lehman Brothers)

Bear Stearns and Lehman's collapse had nothing to do with derivatives.

Oh they most certainly did!

I guess you really were in a coma.

Oh they most certainly did!

Prove they failed because of derivatives and not because of bonds.