Rho Rho Rho your boat

Gently down the stream, Merrily merrily merrily merrrily, Life is but a Dream. Especially since Janet has taken out Interest Rate risk.

A Lot of models and hedgers like reducing Rho to nuttin'. Imagine being in an Adjustable Rate Mortgage where it drops. The whole nervous lead up to the last FOMC was the threat of interest rate rise and a return of the Rho Factor. It has to go up with a recovery because it has been kept really low since Ben came on the scene. It was supposed to fuel a recovery out of nowhere because people would theoretically spend that extra money like imbibed sailors back in port. Instead they stayed home and bought down their old mortgages while keeping their 401K's up with the times with whatever extra they could throw in it. Now we have an inflated bunch of equities. When Rho comes back, they will be tapped to cover it before those expiring locked in rates bite back.

Rick Santelli likes to watch the Ten Year Bond rate. 262 was the number, meaning 2.62%. Friday they ended at 2.61. The Fed is tapering back its influence from buying back bonds, but not completely yet. Still fair rhoin' so yard away. The Fed still knows there are a lot of Rho Boats far out from shore to rescue from a hurricane coming up. Sure they're taking off, but they say they will be back if the chop gets a little too nasty. Be warned that means if YOUR Rho Boat sinks as an indicator. Just sayin'... Mind that statistic before you become it. But the Fed discovered that while more gas doesn't make the boat go faster, it will surely go farther. Of course that makes it tougher to rescue way out there as well. Thus the applause like sound of smacking their foreheads, and they Taper. The only question that remains is did Ben's bean make a louder sound?

So what about Corporate Bonds which allegedly don't have Fed attachment? CNBC did a whole piece about the corporate bond trade being crowded. The herd has already trampled that pasture, and the grazing is crappy. Literally.