A relentless rise in Treasurys

This move is too fast, too furious and too unjustified by the facts.

By Jim Cramer Aug 20, 2013 9:41AM

thestreet logoMaybe it really is just too thin a market. Maybe we aren't used to U.S. Treasury bonds being traded as thinly as they are in the middle of this August. I don't know what else could be responsible for a move up in interest rates like this -- other than if the Federal Reserve were dumping Treasurys, instead of buying them.

 

It is a little counterintuitive. We've got no real loan growth to write home about. Sure, we had a red-hot housing market, but I think we will find that the market has cooled by now. Before, buyers didn't have to think about what rate they were locking in because all they ever got were lower rates. Now, they do have to think about it, and that's an impediment to a process that's not easy to begin with, especially when you see housing prices going up right before your very eyes.

Still, though, you would think the volume of home sales would at least approximate half of what it was in 2006, before you saw this kind of actual demand moving up rates. The level is just not justified by the real economics we're seeing here.

 

Miniature home on sheet of percent signs © Comstock/Getty ImagesAs I search for reasons, aided by my colleague Matt Horween, I think that perhaps Europe is turning faster than we think, and that the demand for money worldwide might be increasing. Maybe that's why the euro is so strong, too. Perhaps the eurozone can grow 1% to 2%, and that will pull up the world's interest rates.

 

But I simply don't see any activity here that could justify this move. It's either artificial, or it is coming from overseas -- because no bank, not a single one I deal with, is saying there's newfound demand for credit.

The good news? If interest rates could go up this fast, they could go down this fast, and everything that's getting killed will come back to life. The bad news? I don't believe the 10-year bond will go back to 2.5%. Instead, I believe it will go to 2.75%, down from 2.86%. I think that could happen later this week, in fact, as the Fed has to be horrified by the relentless nature of this new move.

 

It's too fast, too furious and too unjustified by the facts.

 

cramer

 

Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust

 

 

 

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91Comments
Aug 20, 2013 9:59AM
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"This move is too fast, too furious and too unjustified by the facts."

Instead of using this to describe interest rate increases, Cramer should have used it to describe the move in stocks over the last year or so.

As far as interest rates go, they are all relative to your perspective.  A move to 2.9% on the 10yr might seem huge compared to where it's been the last couple of years.  But it's amazing how quickly people like Cramer lose sight of historical norms.  From that perspective, interest rates SHOULD be rising fast and furious.
Aug 20, 2013 10:16AM
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Maybe Jimmy boy, the fact we have been printing money at an unpresidented rate my have something to do with it.  Everytime in history when a country decides to print money to bail itself out of debt, bad things happen.  Like, maybe, hyperinflation coming to a country near you.
Aug 20, 2013 10:14AM
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wouldn't you expect rates to rise when QE2/3/4 end? 

 

so wouldn't treasuries rise ahead of the end of QE2/3/4?

Aug 20, 2013 10:09AM
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The process we are beginning to see is what I call scarcity of demand.  What this means is retailers are attempting to recoup the cost of keeping their doors open from a dwindling supply of buyers.  They are being forced to attempt larger profits from fewer customers. This phenomena will be short lived as folks begin to pull in and hunker down.  When folks realize the game being played on them believe me they will rebel.  Just see how long this lasts.  The end result will be lower prices, lower profits, and lower stock prices.  Deflation and contraction is the short order.  This will be very painful and folks will become astute in their desire and ability to drive prices down.  Small business hasn't seen the real struggle yet. We are but 1/3 our way down the path of globalization and every step down will become more and more painful. We should hope folks begin acting up sooner rather than later because as long as this social unrest is allowed to percolate it will ultimately result in an emotional knee jerk response filled with anger and frustration.  In other words violence.  Understanding this has been planned and facilitated against the American worker/citizen is a very difficult idea to sell as folks have difficulty getting their arms around the idea they have been sold out. The slope becomes much more slippery the farther along we go.  Have a nice slide into financial chaos.  JMHO
Aug 20, 2013 11:01AM
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I take the fact that Walmart and JC Penny reporting profits (sales) being down as a barometer on the economy.  The Government is full of guano, lying to us again.  We are heading back into bad times.  These two stores represent the spending of the average Joe and it's not looking good.
Aug 20, 2013 11:00AM
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No worries Cramer..the Fed will tweek those numbers back into alignment for you...they can make the numbers anything they want them to be.
Aug 20, 2013 11:11AM
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Wal-Mart, Target, Walgreens, Kohls other Regional and a certain amount of Grocery stores; May represent the Economy, Skeedaddle.

 

But I don't think Penneys does anymore?

 

Home Depot, Lowes and maybe Regional Menards, may represent home improvement and housing.

Although they are a somewhat different Sector of retail. 

Aug 20, 2013 11:26AM
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The quality of JC Penny's clothing is poor. That is a big problem.

Aug 20, 2013 12:06PM
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"Lumber Liquidators LL P/E is crazy... I wonder if many of these did well because the investors were out there buying homes with cash and fixing up to rent. That is kind of tapering off now. Oh, that word taper...ha"

 

The problem here is-- that most of these guys got HUGE lines of credit through banks at nearly ZERO interest rates. Now the homes they bought and fixed up aren't selling because the prices have been kited too much. The condition know as-- asset rich, cash poor, is not good for America. It suggests we will see another repossession period and a glut of restored tract homes available. Again, without jobs that pay family-sustaining wages and have stability, the Housing Market will crash once more. Worse- all those too low to service mortgages will clog the system and cause banks to ask for bail-out money yet again.

Aug 20, 2013 11:28AM
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There's trillions of dollars in bond and hedge funds and that's enough to move interest rates or anything else up or down.  The markets have been reinvented by automated trading systems into the world's largest casino for the over stuffed and 1% privileged.  Equities are the latest bubble along with fiat currencies.
Aug 20, 2013 11:22AM
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He should have gone ahead and said that what he wants is the Fed to step in and again negate the actions of thousands or millions of people so that stocks can continue to have support. Why is it that if we were to put a ban on selling selling bonds people would be up in arms, but if the Fed steps in to distort the market by buying bonds no one seems to get upset. They both do the same thing, hold down interest rates and negate the actions of 1000's or millions. It is really only different degrees of tyrannical activity.  
Aug 20, 2013 11:54AM
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There was a big run-up in interest rates in 1987 before the crash. Like now, the economy was barely limping along, but  the Fed was still fighting inflation, so the starting point of interest rates was much higher.
Aug 20, 2013 12:31PM
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Jim could also focus on how Markets are manipulating QE -- is it fair, unfair? 
Aug 20, 2013 10:38AM
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There just isn't anything to write home about..
Aug 20, 2013 1:41PM
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This is a "space filler" article by Cramer and MSN editorial staff. Nothing new, innovative or informative worthy of directional change. Simply put, the market is undergoing "growing pains" adjusting to the imminent impact of tapering. Nothing more and nothing less, plain and simple.
Aug 20, 2013 4:10PM
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Folks, we call it as we see it and usually as it happens, nothing is made up.....When manipulators outnumber everyone and to make things worse the volume is crappy, these crooks will always try to do their thing which is manipulate the markets down. Remember, that is how they make their money, in other words by cheating and stealing. Today, like the last couple of weeks, had nothing to do with news or fundamentals...Oh well, at least the S&P was positive, another 5-10 minutes of trading and it would have probably closed negative as well. Today mirrored last Tuesday, only that then we were able to hold and ended up 22 after being up about 80 during the day, and remember what happened Wed, Thur and Fri. If anyone out there still thinks that markets move up or down based on news and earnings only, you are in the wrong business...Oh well.
Aug 20, 2013 11:24AM
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Lumber Liquidators LL P/E is crazy... I wonder if many of these did well because the investors were out there buying homes with cash and fixing up to rent. That is kind of tapering off now. Oh, that word taper...ha

Aug 20, 2013 2:40PM
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Wall Street rebounds from string of losses, retailers gain


Nice headline !!!

Aug 20, 2013 3:28PM
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Somebody really has Dick Cheney for a hero....Tell me I mis-read that, where are my glasses.??

 

****edited for,

 

GET OFF MY LAWN...

Aug 20, 2013 4:20PM
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It is not surprising that investors have lost faith in the markets -- there was no reason for the Dow to finish in the red today.  One expert said it was Exxon, another said it was Home Depot,which had an outstanding report today.  Give  me a break:  So, what caused it? Could it be manipulation?  FED, taper now and put an end to this manipulation

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