Scary pictures, aren't they? 30 year swap rate tumbled from 4.64% in Apr to 3.44% today, 120bps in just 4 months. More stunningly, the 30 year swap spread collapse from -15bps to -42.5bps in just 2 weeks time, I mean 27.5bps more in negative!
The swap rate drop mainly reflect the waning recovery and deflation concerns priced in by investors. It implies that interest rate may stay low longer than previously expected. Meanwhile, the increasing momentum of swap spread tightening in the past 2 weeks I believe is due to the crazy one way receiving by ALM hedgers, pension funds and insurance companies. The magnitude and speed was only seen in 2008 during Lehman collapse time. Based on TA indicators, I see the 30 year swap rate tanking lower with increasing momentum and 30 year swap spread to tighten more. Gloomy, bad for stocks!
1 comment:
Beautiful! convincing! Thanks.
Post a Comment