sellside week ahead - November 21st
Good evening. A quick note this weekend …
HERE are a few observations and narratives from Global Wall Streets inbox.
I’ve gathered what 2023 outlooks I could (NWM, TD, some more from MS and GS) along with some other weekly thoughts and am hitting SEND a bit earlier than normal given a full weekend ahead.
Depending upon your view, rates are heading UP or they are heading down. You can thank me for that later.
I’m in a different seat now and have far less recon at my fingertips and so I’m simply attempting to play along here at home watching a chart here or there and listening TO what some of the smartest in the room are saying / thinking …
From BMOs Ian Lyngen — a ‘market twist on a holiday classic’
The weather outside is frightful
Monetary policy’s undelightful
Since Powell’s the hawk we know
Watch bonds go, watch’em go, watch’em go
Inflation doesn’t show signs of stopping
Even the ECB is hopping
Since there’s no support below
Watch the curve go, watch it go, watch it go
When we finally hit terminal
How we’ll debate where rates can go
Since there’s no way to know, look out below, look out below, look out below...
In as far as a quick VIEW and on a shorter term (ie DAILY) basis, 10yy appear in need of some concession or time at a price where momentum can reset … a selloff:
… On a bit more longer-term (ie WEEKLY) basis, rates appear to have more room to fall …
…. for somewhat MORE and for those more technically inclined, see some charts from 1stBOS noted the other day (HERE)
In as far as a couple OTHER things to consider — from the WWW,
StockCharts.com: Inverted Yield Curve and Recessions: An Odd Couple
St Louis FED (11/7th): Rising Interest Rates Bring Opportunities and Risks for Banks
BBG The Weekly Fix: The Birds Are Battling In a Fragile Bond Market
… Feeling Fragile
But back to that Treasury turmoil.
Judging by Bank of America’s MOVE index, volatility in the world’s biggest bond market is nearly double its 10-year average. Liquidity in the $23 trillion market has deteriorated as a result.
As such, the market’s underlying resiliency was a big topic of conversation at the New York Fed’s annual conference on the Treasuries market in New York. On the eve of the gathering, researchers Michael Fleming and Claire Nelson wrote that while below pandemic-level extremes, bid-ask spreads have widened. Meanwhile, order book depth — the average quantity of securities available for sale or purchase at the best bid and offer prices — was the lowest since March 2020 for some Treasury securities.
“The market’s capacity to smoothly handle large flows has been of ongoing concern since March 2020,” Fleming and Nelson wrote. “Lower-than-usual liquidity implies that a liquidity shock will have larger-than-usual effects on prices and perhaps be more likely to precipitate a negative feedback loop between security sales, volatility, and illiquidity.”
That sounds scary, but some remedies were offered. The US Treasury Department is looking to boost the level of public reporting around Treasuries trading “in a gradual and in a calibrated way,” said Nellie Liang, the agency’s top domestic finance official, starting with on-the-run securities.
The decision comes after months outreach to market participants, which revealed that “additional transparency may improve investor confidence,” she said.
All-to-all trading — in which investors would trade directly with each other without using a dealer — was also raised as a solution. As covered by Bloomberg’s Liz McCormick, five of seven speakers on a panel on the subject agreed that it would aid resilience.
“A key component of it is to be fair for all participants,” Rick Chan, portfolio manager at Pimco, said at the event. “If we move to an area where we are trying to make a more resilient Treasury market structure – moving to a platform that isn’t fair to all will be a mistake.”
Moving on then TO the week ahead 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. Enjoy YOUR weekend ahead.