overnight flows light (UK holiday)
Good morning … taking a couple days off so regular (o/n) updates will resume Wednesday but … as the front end breaks free (see this past weekends sellside observations and a note from expert techAmentalsists, specifically, for how high they might go)
… here is a snapshot OF USTs as of 740a:
… HERE is what another shop says be behind the “Low Conviction Conditions”
… OVERNIGHT FLOWS
Treasuries were weaker overnight in a follow-through from Powell’s hawkish Jackson Hole comments. Overnight volumes were understandably modest given the UK holiday with cash trading at 66% of the 10-day moving-average. 5s were the most active issue, taking a 35% marketshare while 10s were a distant second at 28%. 2s and 3s combined to take 22% at 13% and 9%, respectively. 7s managed 10%, 20s 2%, and 30s 3%.
… and for some MORE of the news you can use » IGMs Press Picks for today (29 Aug) to help weed thru the noise (some of which can be found over here at Finviz).
For some further review, a couple items from Global Wall Street’s s inbox. Wells
Forgive & Regret: Implications of Student Debt Relief
The Biden administration announced a plan to provide relief to millions of borrowers with outstanding federal student loans, although legal challenges and bureaucratic hurdles could impact implementation. In this report, we unpack the details of the administration's plans, estimate how many borrowers might be affected and outline some initial thoughts on the macro implications…… The combination of lower debt and higher savings likely means the net effect is marginally more inflationary in the near term, likely adding to the difficulty of getting inflation back to the Fed's target. But there remains much uncertainty surrounding this announcement, particularly around forgiveness, and we may very well remain in student-loan limbo for months …
And for our collective inner stock jockey — every bear has its day — MS,
Fed Hits Stocks but the Larger Risk Remains Earnings, Not Rates
Chair Powell and the Fed make it crystal clear that their job fighting inflation remains unfinished. Ironically, while bonds took the message in stride, stocks seemed to be shocked by the messaging. The path for stocks from here will be determined by earnings, where we still see material downside.
Unfinished business for the Fed…While the Fed's messaging from its annual meeting at Jackson Hole was completely unsurprising to the bond market, stocks seemed to be shocked by the hawkishness of the tone. We chalk this divergence up to the fact that the equity market became a victim of its own momentum over the past few months as CTAs and other price insensitive buyers drove valuations to unrealistic levels. While P/Es have come back down, they remain well above fair value based on our equity risk premium framework.
Earnings are the bigger risk for stocks from here… Almost all of the weakness for stocks during 1H22 was due to the Fed and tighter financial conditions. The 2H outcome will ultimately be determined by earnings expectations for next year, in our view. As a result, equity investors should be laser focused on this risk, not the Fed, particularly as we enter the seasonally weakest time of the year for earnings revisions, and inflation further eats into margins and demand.
...And leading earnings indicators point to weakness ahead... We remain focused on the spread between forward sales growth and rate of change on PPI and the spread between nominal GDP growth and wage growth. Both indicators suggest margin pressure and earnings growth risk ahead. This view is confirmed by our leading earnings model, which projects a steep fall in EPS growth over the next several months. A key input to this model is the ISM manufacturing PMI, and leading regional Fed manufacturing surveys point to continued downside in the ISM PMI. The rate of change on earnings revisions breadth also leads forward EPS growth and points to growth downside as well
… THAT is all for now. Off FROM the day job today / tomorrow…back at it Wednesday.