RATE SURGE CONTINUES PRE-OPEN

All the focus is on bond yields after yesterday's debacle in the bond market. The 3 year auction did not go well. Today we have the 10 year and tomorrow its the 30 year which has seen the last 2 auctions go bust. And the climb in rates continues this morning with the 10 year up another 10 basis points to over 3.20 as of the time of this post. Btw you can get the latest bond prices here and they update relatively frequently. Now of course for you regular readers the rise in long rates comes as no surprise since we've been writing about this for many weeks. It seems that now the rest of the world has noticed that something is going on. But what exactly is the rise in rates telling us? Well it could be saying that the economy is getting better, there won't be another quantitative ease, and the fed may be able to end QE2 early. Or the bond market could be saying "No more! We are no longer going to accept low yields given what you have done to your fiscal house." As long as stock markets talks itself into believe its the first choice, stocks can keep going higher. However i happen to believe that at some point, the markets will come to believe the second choice. And that's where the gnashing of teeth will begin. But for now, the bulls are in control.

Meanwhile as far as today's auction is concerned, given the 30 basis point rise in the 10 year in 2 days, today's 10 year auction might not be a bust. It could be that the yields are being driven up to attract buyers. If today's auction does not go well, it might be wise to keep an eye on the exit door. And for MLPS which have been in a tight sideways range for week's now, the spread between the top mlps and the 10 year is under 3% again. Food for thought.

So far this morning MLP land is pretty quiet. No upgrades or downgrades and no corporate news. Energy will be in focus today as inventory numbers are out for crude at 10:30am. Nat gas pulled back yesterday however the coldest air of the winter will be in the east next week and that is going to perhaps give nat gas another tailwind in its current rally. Stock futures are flat ahead of the open and the dollar is a little stronger against the major currencies.

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