Monday, June 9, 2014

PBOC RRR 50 bp

We got another bit of bad news for the bears, with the PBOC joining the liquidity party by throwing their hat in the ring with a 50 bp RRR cut.  China clearly wants the yuan to weaken to boost exports, since they no longer seem to care about inflation, and want to keep the good times rolling.

The S&P is in the middle of a blowoff top, the optimism is palpable, something I haven't been able to say since the end of December.  Consequently, you are getting a push up in bond yields.  Ahead of the 10 yr and 30 yr Treasury auctions later this week, looks like they are selling them ahead of time.  It is getting closer to my desired long entry point of 2.63-2.65% 10 yr yields in Treasuries.

I see little upside now that the bull catalysts have all been spilled.  I would like to see a bit of euphoria before I decide to short, but we are getting close.  Tops are tough to time, we could hang around the highs for a few weeks, or it could be just a few days.  Just waiting for the right moment to strike.

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