Saturday, July 17, 2010

Weakness - Or Just Shaking The Weak Hands Off? 2-Year Treasury' Yield Fall to Record Low

The two-year Treasury note yield dropped for the 7th straight week, falling 0.04%, which may seem low, but it's 6.34% of what it was. The new yield is 0.59% and is just 0.0135% from the lowest level ever of 0.5765%.

The 10-year note yield also fell 0.14%, to 2.92%, from 3.06% on July 9. Accordingly, TLT, the popular 10y Treasury ETF, is trading at $100.80.

The yields are dropping because investors are fleeing to safety, which is the US treasury notes (the wisdom of that is a different story). This fact has been reported by pretty much all financial media and entertainment TV. This raises the possibility that weaker hands are simply being shaken off the market. A few more drops like this and all weak investors will sell, paving the way for another massive rally, and massive profits by the big fish.

It is becoming quite apparent that quantitative easing II is coming, and with it, massive currency fluctuations (as in US dollar drop), eventually causing stocks and commodities to go up.

It's investor beware. This is why we use straddles.

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