Good morning … Overnight, China NBS PMI unexpectedly expanded in September, edging up to 50.1 from prior 49.4 and f/c 49.6 … China Caixin PMI contracted more than expected to 48.1 from prior 49.5 and f/c 49.5. EZ ‘flation SOARED to record 10% (CNBC) and last night, Tua Tagovailoa … got hurt…
Back here on THIS side of the pond, Fed Daly said “a more sustainable path necessitates higher interest rates and a downshift in the pace of economic activity and the labor market. But for now, inducing a deep recession does not seem warranted”.
Clear as mud. I NOW understand the true meaning behind the song
After all these years … Ok then, anxious to put September behind us and while this may NOT be the wakeup call you were looking / hoping for, and it is a bit premature, here’s a look at 2yy MONTHLY,
overSOLD (momentum / slow stochcastics on the bottom part of the graph) to be sure BUT doesn’t mean there’s any imminent correction lower in yield, as you can see …
… here is a snapshot OF USTs as of 705a:
… HEREis what another shop says be behind the price action overnight…
… WHILE YOU SLEPT Treasuries are higher and the curve flatter out to 10yrs as short-term momentum studies flip bullishly across the Tsy curve- hinting that a correction of the deep oversold conditions is now in motion. We discuss this below. DXY is higher (+0.25%) while front WTI futures are little changed. Asian stocks were mostly lower, EU and UK share markets are modestly higher while ES futures are showing +0.3% here at 7:15am. Our overnight US rates flows saw a much more subdued Asian session that featured early real$ selling in the long-end what, when finished, led to further long-end and intermediates-led gains in Treasuries. Our London desk reported little flow in this morning's rally with some month-end x-market buying noted after France's CPI print came weaker than expected. Overnight Treasury volume was ~65% of average overall.
… TLT's monthly: We used this monthly chart as a hat tip for long duration. Earlier this month TLT's kissed their Taper Tantrum low, rejecting it amid a deep, long-term 'oversold' condition (lower panel). As you can see, no evidence of a long-term momentum swing upward at today's month-end close, but the set-up looks good for that if conditions play along- following 2's and the front end perhaps. So if 2yrs flip, we'd guess that the long-term trend reversals could pretty quickly ripple out the curve. We'll see what develops.
… and for some MORE of the news you can use » IGMs Press Picks for today (30 Sep) to help weed thru the noise (some of which can be found over here at Finviz).
Just a few items of interest (mainly to ME) before weekend. This first one from ZH and ultimately Ven RAM of BBG fame / fortune and is specifically for bond jockeys / friends still in ‘the game’ to consider heading into QUARTER END
A pension-fund strategy that aims to reduce volatility without lowering returns created the first crack in the financial system after one of the fastest jumps in interest rates in decades.
The Bank of England stopped the selloff exacerbated by heavy selling from U.K. pension funds forced to raise cash.
The strategy is resulting in more modest selling in the U.S. as pension funds needed to increase collateral.
Pension funds adopted the so-called liability-driven investment strategy, or LDI, to address regulatory changes and help to close the gap between assets and liabilities. But the strategy faltered as interest rates surged and bond prices fell, forcing more selling and driving prices still lower…
… This week’s bond meltdown is the first serious financial crisis to test how LDIs perform under extreme market conditions. The permeation of the strategy into pension plans affecting millions of people had largely gone unremarked. “The strategies have been below the radar,” said Peter Moizer, an accounting professor at the U.K.’s Leeds University Business School.
Thank you BoE … Moving along, here’s one from a semi-official blog — St Louis FRED — with what looks to be an odd ‘update’ or reminder …
How and why do financial markets react to war? One aspect of war is to endure losses, and financial markets typically don’t respond enthusiastically to even the risk of loss, let alone widespread destruction on their own soil. Markets may also rise and fall over the course of the war as the fortunes of the warring parties change…
Is there something we should know and prepare for OR, well, nevermind…I’m sure THIS ONE is nothing
… The wave of volatility that swept across the world of sovereign debt threatened to bury the notion that these are safe-haven assets, with the MOVE index — the bond market’s fear gauge — reaching the highest since the pandemic at a time when its equities counterpart, the VIX, was far less excited. US swaps gyrated in a way that hasn’t been seen for more than a decade as traders struggled to work out where rates may end up. Treasury 10-year yields jumped by the most since the March 2020 meltdown and liquidity in the Japanese market deteriorated to the worst since 2011.
The epic sell-off did spur some investors to say it looked like time to buy, but it’s not really clear that this sort of a wild week was the sort of thing to tempt $5 trillion or so of cash that has been sitting very firmly on the sidelines…
… Check out the decline in the Investment Grade Bond ETF $LQD this year:
This fund represents the highest quality corporate debt there is. LQD is down more than 22% during the trailing twelve months, undercutting its covid lows. If this doesn’t signal distress, what does?
Credit markets are clearly under increased pressure. Some of the world’s most reliable sovereign spreads are widening, bond market volatility is through the roof, and investment-grade bonds are in free-fall.
The environment is deteriorating as risks intensify. Don’t try to pick the bottom. Instead, focus on risk management and protecting capital …
Begin? Where YOU been? Payin’ up for the allstar charting gurus while you may very well have been just, you know, lookin’ out the window? Ok, sorry, they are great, I’m sure.
For those of us looking for decent and FREE content, Kimble Charts offered this
… The first chart is the Junk Bonds ETF (JNK) on a “weekly” timeframe. As you can see, $JNK is nearing its COVID lows and has fallen much lower than its June low. This has formed a bearish divergence with stocks, as several indices have yet to puncture the June low… or, if they did, it was very marginal.
The second chart looks at $JNK versus the S&P 500 ETF $SPY. This illustrates just how much further $JNK has fallen when compared to stocks.
In summary, stock bulls do not want to play a game of catch up with junk bonds! Stay tuned!!
Okie dokie … For those attempting to follow the flows, REUTERS
… Investors offloaded a net $22.07 billion worth of global bond funds, in their biggest such weekly net sales since June. 22, data from Refinitiv Lipper showed.
I’m moving on and as September ends (wake me up when September ends), and lets not forget, 4p is the NOW NOT NEW 3p, it was Jan of 2021 when changes were announced TO the FI marks to line up with equity markets close (ok, so the bond jockeys GAVE the stock jockeys this one) and in my former seat, I wrote it up HERE:
… IF you clicked through you’ll find what was then on MY MIND, p2
4pm has been the new 3p for awhile and so I’ll move along and end with this one — a fitting ‘toon from Investing.com
