The Treasury is soon to make a stunning announcement.

In my post from April 19th, Stormy Weather, I noted that the fed can drive rates lower by driving Treasuries higher.

This outlier move in Treasuries has been a central theme in these pages. Except for one thing. I never revealed the catalyst. What will be the catalyst? The Quantitative easing they announced in their 300 billion Treasury buy back plan has been shrugged at. To you, my readers, I will now reveal the catalyst.

Often when I explain what a catalyst will be, I do it by taking a page, out of our history.This article from November, 2001 from the New York times talks of what the Treasury Department was up to way back in 2001. History doesn’t repeat, but it often rhymes.

The Treasury Department’s decision to stop selling 30-year bonds could help push longer-term rates lower for reasons that have less to do with the economy than with the mechanics of the bond market. With no new 30-year bonds, more investors who want to own long-term bonds backed by the government will buy the Treasury’s 10-year note, which influences the interest rates on home mortgages. The added demand will push the price of the 10-year bond higher, and the yield, which moves in the opposite direction, lower. With the 10-year rate and related rates falling, mortgage rates will fall, too.

The Treasury Department will stop selling the 30 Year, which will push up demand for the Ten Year, driving rates lower. Is the strength in the housing index anticipating this? Driving mortgage rates even lower would allow a massive refi and write down cycle in residential mortgages. Just what the economy needs, to finally take flight again. Then what happens? They’ll do what they did then. Offer the 30 year for sale again. Same cycles, different players.

I wonder when they’ll announce it? During the market? After? Before? Who knows? Whenever they do, it will be a shock to everybody. Everybody but those who read me. Mr. Volatility.

Peace

Today is the beginning of another story. Visual storytelling of some kind or another has been around for centuries, since cavemen were drawing on walls.

The story of Mr. Volatility is going to fill up the cave walls of cyberspace. This story, like the computing cloud, has so many layers, that, at the highest level, it is seen as layerless. Just like The Singularity.

I am broadcasting aboard The Errol Flynn. For now the Volatility Don is signing off. It’s time to celebrate. I leave you with the following.

Why do you think the old stories tell of men who set out on great journeys to impress the gods. Because trying to impress people just isn’t worth the time and effort.
-Henry Rollins

From time to time in the sciences a true genius will emerge. I am not referring here to a genius in technical power–that can be remarkable but sometimes quite superficial. A genius is someone who, like the ancient prophets, has a pipeline to the Godhead. It is a kind of madness, but it is correct.
-Heinz Pagels

Peace

My paradox

I walk my walk
I talk my talk
And therein lies
My paradox

Don’t live in a box
My doors don’t have locks
And therein lies
My paradox

In the streets I hear the talk
I’ve had some hard knocks
And therein lies
My paradox

I’m funny as can be
I know a lot about stocks
And therein lies
My paradox

Now I see this clearly. My whole life is pointed in one direction. There never has been a choice for me.
-Travis Bickle