Dr. Doooooom blasts JPOW on 'flation
(and some closing bond market thoughts with FV @ 119-29 or so)
Henry Kaufman phone interview by Bloomberg a short while ago will, if nothing else, give you something to do other than watch NASDAQ (longest of long duration assets) which are sinking like the deck chairs on the Titanic.
CNBC: Nasdaq falls nearly 2%, Dow turns negative as tech rally breaks down
When Hank speaks old school markets folks tend to listen. Bloomberg phone interview with the beloved Dr. Doom worth a click as he blasts JPOWs stamina
Henry Kaufman, 1970s Wall Street Dr. Doom, Blasts Powell on Inflation
Kaufman questions Fed chair’s ‘stamina’ to tame prices
Former Salomon chief economist urges immediate rate increases
“I don’t think this Federal Reserve and this leadership has the stamina to act decisively. They’ll act incrementally,” Kaufman, 94, said in a phone interview. “In order to turn the market around to a more non-inflationary attitude, you have to shock the market. You can’t raise interest rates bit-by-bit.”
Powell this week told lawmakers in congressional testimony that there’s a “long road” toward getting Fed policy to a “normal” setting -- suggesting more aggressive action isn’t needed to pull down inflation. Powell said the planned withdrawal of stimulus “should not have negative effects on the employment rate” -- a big contrast with the Volcker-era tightening that contributed to a surge in joblessness.
When Hank speaks,
In closing (of the bond market, from one who writes about said market 2x / day), a closing,
After a fast and furious two-weeks of belly-led re-repricing, short-term positioning metrics are beginning to ‘red-line’, while the market may need more than just hawkish rhetoric to break out of the “3-4 hikes in 2022” mold. Tomorrow’s Retail Sales report might be a bullish pot-hole as well, the ‘whisper’ number likely skewing to the downside after yesterday’s e-commerce report showed the slowest rate of online shopping sales since 2014 (thanks in part to a 10% rise in ‘out of stock’ messages). While Citi Econ is penciling in a solid control group number of 0.7% MoM, their preview notes “substantial downside risks to spending in December, partly due to a very unfavorable seasonal factor, particularly for non-store sales.” Much akin to December 2018 and December 2020, when a “pull forward” of spending caused non-store sales to drop substantially, 2021 may have been no different. We’ll see how the wash comes out tomorrow, but positioning-wise, the RPM data does suggest some short-covering / profit-taking is already leaking into the market with ~$8mn/01 covered over the last 2-days. By sector, the belly is the most at risk with FV 1-month positioning of -$12m / 95th %-tile, vulnerable to further richening above 119-29.
Today’s mild bull-steepening px-action in the US left much to be desired after the excitement earlier in the week, volumes dropping to a mundane ~70% of the 30-day average. That said, a strong rally across EGBs and resumption of growth-equity weakness (despite lower real rates) did stir the pot a bit. Flow-wise, after 10s briefly re-tested the 1.76% traffic zone overnight, Asia real$ capped the move, while our futures desk saw RM adding to 2/10's and 5/30's flatteners in London. In US hours, bullish px-action was sporadically goosed by FV block buys (7.5k bought at 9am, 5k FV bought at 9:30am, 7k FV bought again at 1:45pm, >1.1mn/01 in total on the session).
… 10y US yield: also at risk of a bullish ‘false-break’ pattern here in the US after failure to sustain the >1.77% level (March highs). A daily momentum bullish cross on today’s close was seen, with next resistance at the 1.54% level (50dma).
For somewhat MORE, BBG
USTs Gain as Auctions Conclude, Stocks Slide; Bank Bonds Ahead
Treasuries ended Thursday higher following solid demand for a 30-year bond auction and three large block trades in 5-year note futures. A selloff in U.S. stocks and gains for European bonds contributed, along with expectations that Friday’s quarterly reports by large U.S. banks will be followed by bond sales that create receiving flows in swaps.
Treasury yields ended lower by up to 5bp across belly of the curve which outperformed, richening the 2s5s30s fly by 2.5bp on the day; 10-year yields ended around 1.70%, richer by ~4bp vs Wednesday’s close
Three block trades in 5-year note futures totaling 21,500 contracts worth $1.1m/DV01 all appeared consistent with purchases based on price at time
Long-end of the curve drew support from results of $22b 30-year bond reopening; despite small tail, 17.9% primary dealer award was lower than previous as indirect award increased to 65%
With JPMorgan Chase & Co., Wells Fargo & Co. and Citigroup Inc. reporting before U.S. stock trading begins Friday, Treasuries stand to benefit from receiving flows in swaps linked to financial issuance; Thursday’s session saw just four borrowers price $3.8b in sales
Related: Influx of Bank Issuance May Support Treasuries Over Coming Days
By 3pm ET U.S. futures volumes were slightly above 20-day average, concentrated in 5-year note contracts
So it would SEEM all this short-covering buying (putting of hay in the barn) was done on volumes slightly ABOVE 20dMA … I’ll spare you an updated visual of FV but suffice it to say, 119-29 seems to be a fitting end to the story of today…
That’s it for now. Have a great afternoon / evening … until we discover what did / didn’t happen while we slept.