a few SELLSIDE OBSERVATIONS and a couple funDUHmental economic calendars and thoughts for the week ahead
Good afternoon … how ‘bout that long bond
With rate hikes and cuts both top of mind and represented by some price action … Leaning on ZH for a visual here and there (more often than not and likely more often than I should, I know), this past weeks latest recap caught my attention as we consider the week ahead and specifically, the FOMC meeting (announcement Wed) in as far as what is priced …
Bonds & Bitcoin Soar On Week As Dismal Data Drives Dovish Dive In Rate-Hike Odds
… There is now just a 9% chance of a 100bps hike next week, and a 33% of 75bps in September...
The Fed HATES surprises and surprising as much as markets and participants. The fact that there is a non-zero chance of 100bps means just that BUT that isn’t any of our ‘base case’ and so, we’ll simply go with CMEs FedWatch Tool and those who are putting their monies where their mouths are.
HERE are a few observations from Global Wall Streets wiz kids … some of the narratives being passed around desks and offered to clients in hopes for flows. A couple things which struck ME as important
Barclays (earlier in the week and I mention because the slide I’ve pulled forward is at least part of the reason I’m no longer in the ‘front row’ with a Terminal license) …
Another interesting (to me) report which is, as I like to think of it, an expression of how it IS that nothing happens without a consequence … A large German bank discusses,
The midterm elections and implications for the US economic outlook
Go ahead and pick an analog and let me know what you think you know about the future of our elections and how it’s going to express itself in rates…
Meanwhile, you know who is still reminding one and all that bonds are NOT dead yet.
…This is a good story, and like all good stories, it contains a grain of truth. The largest expansion of central bank support in history in 2020-21 did boost both stocks and bonds, support that is now reversing. But there is also a risk of confusing direction and magnitude: bonds can still be good diversifiers, even if they aren’t as good as before.
Even ZH thought enough of this post to make one of its very own HERE.
"Escalator Up, And Elevator Down" - 60:40 Isn’t Dead, Just Resting
A couple OTHER things which I’d consider…ahead of the markets open this evening and before the Fed meeting / announcement Wednesday.
COMMODS pointing to LOWER RATES (via KIMBLE):
Important Commodity Ratio Points To Lower Interest Rates
… Now look at the past 2 years. The ratio peaked at point (2), and interest rates are just now starting to pull back. Will this indicator work again? Or will it be different this time? Stay tuned!
Not JUST metals but thankfully, price at the pump has been coming down a touch … demand destruction, anyone?
POSITIONS (via Hedgopia): large net speculative 30yy SHORTS UP just over 81% to a 25wk HIGH as 30yy were DOWN 10bps
With this newly ‘ish minted (marginal, at best) short base in mind, worth noting some technicians are
… neutralizing our long-held technical bias for higher yields and turning 3-6 month neutral from a technical perspective on global government bonds, as major tops are threatening across core yields. We have previously been calling for core yields to move higher over the medium term relatively consistently for the past 2 years (see our outlooks for 2021 and 2022), outside of a brief period in August 2021. The threat of these major tops in the German 10yr and US 10yr Yields suggests that the technical evidence for longer-term bond yields is increasingly skewed to the downside …
… Only a weekly close below 2.715/705% would confirm the top though, with the next resistances then seen at 2.555/55%, before the 38.2% retracement of the 2020/22 upmove at 2.305%, which would become our core objective if the top is confirmed. In contrast, a break above 3.10% would lessen the threat of a top and keep alive the prospect of a turn back higher, particularly if it occurs on the back of a hold above 2.715/705%.
… AND for any / all (still)interested in trying to plan your trades and trade your plans in / around FUNduhMENTALs, here are a couple economic calendars and LINKS I used when I was closer to and IN ‘the game’.
First, this from the best in the strategy biz is a LINK thru TO this calendar,
Wells FARGOs version, if you prefer …
… and lets NOT forget EconOday links (among the best available and most useful IMO), GLOBALLY HERE and as far as US domestically (only) HERE …
… THAT is all for now. Likely very little if anything tomorrow due to some ‘time off for good behavior’ … Enjoy rest of the weekend.