Business

Ever since the unexpected gating and liquidation of Third Avenue's credit fund in early December, there has been a jump in comparable credit money managers, both of the mutual and hedge fund variety, such as Claren Road and Stone Lion Capital, who have decided they'd rather hand in the keys and repay their investors (at a loss) than try to eek out alpha in an environment where, as Richard Breslow put it earlier, "it feels like the algos are hooked up to Tinder."

For the first time since 2007, the spread between 2Y and 10Y US treasury yields has to 100bps. While not inverted, which the status quo maintains means there cannot be a recession, the bond market is flashing ominous signs for both the economy and the US financial system...

The curve has collapsed since The Fed hiked rates...

And financials have begun to catch down to that reality...

Charts: Bloomberg

Submitted by Axel Merk via Merk Investments,

"The Fed doesn't have a clue!" - I allege that not only because the Fed appears to admit as much (more on that in a bit), but also because my own analysis leads to no other conclusion. With Fed communication in what we believe is disarray, we expect the market to continue to cascade lower - think what happened in 2000. What are investors to do, and when will we reach bottom?

After yesterday's mediocre 3 Year auction, there were concerns whether the Treasury would find willing buyers to soak up today's $23 billion in benchmark 10Year Paper. Those concerns were promptly relieved moments ago when not only did the 10Y auction price stopping through the When Issued by a whopping 1.3 bps, at 1.73%, but it was also the lowest yield since December 2012.

Back in March 2013, when nat gas, and pretty much everything else, was trading far higher than where it is today, investors who believed in the vision of Chesapeake'snow long gone CEO Aubrey McClendon had no problem writing a check for $500 million of other people's money to the Oklahoma gas giant, hoping to generate a "whopping" 3.25% return by the time the bonds matured on March 15, 2016. 

Sadly, since then things changed.