Sellside observations (Jan 22nd, 2022)
most HATE bonds (haters gonna hate) then there's HIMCO and GMO; a few TRADE IDEAS, too many FOMC PRE-CAPS and victory laps and ... WORDLE?
Good morning and pardon the interruption. After the way in which this week ended, I’m sure the bell ringing Friday didn’t come soon enough AND there aren’t enough distractions. Unfortunately, only a few hours left until the opening bell this evening — don’t shoot the messenger — to prepare. A decent recap from ZH:
Markets Scream 'Panic' To Powell As 2022's Tech-Wreck Is Worst In Over 30 Years
I’ve taken the liberty to cobble together a few items for your review and have prepared THIS PDF. I’ll describe it like this:
MOST of Global Wall Street (ie SELLSIDE, HERE) HATE bonds — full STOP. Haters gonna hate. As you flip thru all the FOMC PRE-CAPS and victory laps, here are few things which stood out to ME
Barclays: 3s10s FLATTENERS (50bps) and also how MUNIS respond to rate shocks
BMO: join selloff in 30yr breaks, watch 5s vs 2s30s ‘fly
BAML flow show PIC, “rates UP, PROFITS DOWN” bad for stock jockeys
DB charts 700+ years of STAGNANT REAL WAGES and…
MS notes on RATES SEASONALITY and WILSONs Sunday Start, “Winter Is Here” with a similar visual to BAMLS, showing S&P YoY and MFG PMI YoY
And more. MUCH, much more … I’d ALSO mention a couple PDFs which are a bit ‘off the reservation’ and more aligned with, lets say, MSs stock jockey, Mike Wilson.
First, this week we heard from GMO — thinking stocks going to get cut in half: Let The Wild Rumps Begin ((Approaching the End of) The First U.S. Bubble Extravaganza: Housing, Equities, Bonds, and Commodities) — or, if you prefer ZH snark **AND IMPORTANT REMINDER**, Grantham's Super Bubble Leading To Doomsday Forgets The Fed Put,
The other side of the very same (stocks correction) coin and more RATES SPECIFC is from another lunatic fringe economist who, for whatever reason, everyone loves to hate.
HIMCOs Lacy Hunt: negative REALZ sign of recession, bonds for the long run (or at least 60/40 ain’t dead yet).
… Due to poor economic conditions in major overseas economies, 10- and 30-year government bond yields in Japan, Germany, France, and many other European countries are much lower than in the United States. Foreign investors will continue to be attracted to long-term U.S. Treasury bond yields. Investment in Treasury bonds should also have further appeal to domestic investors, as economic growth disappoints and inflation recedes in 2022.
Bonds are DEAD! Long live the LONG BOND!
A couple other items I’ll be reviewing before markets open Sunday evening:
POSITIONS — In addition to what was NOTED YESTERDAY HERE,
BBGs Cam Crise: CFTC Positioning Update: Strong Dollar Selling
(Bloomberg) -- The CFTC Commitment of Traders report has been released, showing futures positions as of Tuesday’s close. Highlights of speculative positioning include:
In fixed income, flow was mixed but skewed generally to the buy side. Specs bought 5s (82k), 10s (72k), and long bonds (18k) while selling 2s (13k) and ultras (29k). The aggregate duration short fell by 63k TY equivalents. Eurodollar short positions, meanwhile, increased by 47k.
In FX, the market was an aggressive seller of dollars. Specs bought euros (18.6k), sterling (28.9k), CAD (14.9k), yen (6.6k), and AUD (3k) while selling a little bit of Swissie (3.2k). The aggregate dollar long fell by $7 billion, the strongest selling since June 2020.
In equities, there were some ill-timed purchases as specs bought SPX minis (48k) as well as NDX futures (9k). They did manage to sell 8k Dow and 9k Russell contracts, however. The VIX short fell modestly, by 6k contracts.
Elsewhere, specs continued buying good amounts of crude, adding 25k contracts to their longs. They also added 5.6k copper futures to their long position but sold 5.5k gold futures.
For somewhat MORE, see HEDGOPIA HERE (net spec 10yy shorts -21% WoW which was HIGHEST SINCE Feb ‘20 and net spec 30yy short -27% WoW to a 3wk low) Need moar? INVESTMACRO HERE, noting COT Bonds Speculators sharply reduce 5-Year Treasury bearish bets for 2nd week
That is all. Enjoy todays games and rest of the weekend and as you do, help me come up with exactly what the motivation or message is for this recent TIME MAGAZINE COVER - I’ll start — climate change making it rain in the oval?
Too political? How’s THIS ONE:
OK, I’ll quit while I’m behind and post this on WORDLE cuz, you know. Wordle
