This is a bond rally, punk. Go long — go ultra-long — or go home:

Although we’re not quite sure why.

For a start, the euro 30-yr swap caved even further into post-Lehman lows on Monday:

And speaking of ultra-long rates — we’d also note the curious difference in the inflation expectations apparently revealed in this chart of Tips (white line) and index-linked gilt (red line):

Remember that the white pill brings the benefit of a deflation floor put option, whereas the red pill doesn’t. We have a bad feeling about this. Thoughts?

Related links:
Tips are the best – FT Alphaville
David Rosenberg on why the yield curve will flatten – this time! – FT Alphaville

This entry was posted by Joseph Cotterill on Monday, August 16th, 2010 at 11:48 and is filed under Capital markets. Tagged with bunds, Deflation, gilts, government bonds, inflation, swaps, TIPS, Treasuries. Edit this entry.