(UK 'flation; P&G says; mortgage DEMAND DROPPED)while WE slept
Good morning … this will be the final installment of spam for the week. I’m traveling out West (Colo ST v Hawaii this Sat) and hope to resume regular spamification Monday.
That bit of housekeeping out of the way, lets jump right in … here’s a look at what is on today’s menu — the 20yyy
hugging that there bearish TLINE and not a bid in sight …? Suppose it’s too early to declare a loss — should at least wait to see the afternoons liquidity event reception so for now … here is a snapshot OF USTs as of 705a:
… HERE is what another shop says be behind the price action overnight…a morning comment titled, “Skeptical on Stopping”
… OVERNIGHT FLOWS
We saw mixed flows across the curve overnight as Treasuries sold off with cash trading at 78% of the 10-day moving average. 5s were the most active issue with a 35% marketshare followed closely by 10s that took 34%. The front-end accounted for 17% with 2s and 3s taking 8% and 9%, respectively. 7s managed 8%, 20s took an elevated 2% ahead of the auction and 30s claimed just 4%.
… and for some MORE of the news you can use » IGMs Press Picks for today (18 Oct) to help weed thru the noise (some of which can be found over here at Finviz).
First up, from the NOT NEWS department,
CNBC: Mortgage demand drops to a 25-year low, as interest rates climb
As far as a few things from the Global Wall St inbox which caught MY attention, well, this first one made me pause and HOPE (or at least ask) that XMAS was going to be cancelled. Wells Fargo,
2022 Holiday Sales: The Last Hurrah
With a recession on the horizon and inflation chipping away at spending, you might be surprised to hear that our forecast puts holiday sales on track for a 6% annual increase, well north of the long-run average of 4.6%. This report makes the case for why this holiday shopping season will represent the Last Hurrah for this economic cycle.… The staying power of the consumer has proved to be robust, but it is waning. Cash reserves that households built up during the previous two years have begun to decline. The household balance sheet has taken a hit due to a lower saving rate and declining real wages, posing a possible downside risk to holiday sales activity in the coming months.
That said, we think consumers will continue to spend and travel throughout the holidays, ushering in the most 'normal' holiday season since the pandemic. But as the calendar flips, spending looks set to slow further. Recent spending has come at the cost of a deterioration in household finances and as inflation persists, households will find it increasingly difficult to rely on their balance sheets to fund spending. This headwind is only amplified as the Fed continues to aggressively tighten policy. The 2023 spending environment will thus prove more challenging, and in many ways we view this year's holiday shopping season as the Last Hurrah for the consumer.
Skate to where the puck is gonna be OR simply keep whistlin’ past the graveyard? XMAS may not be cancelled (yet) — that’s the GOOD news — but its the whatever NEXT or is / may be ‘round the corner (ie COST OF LIVING CRISIS — thanks, VolckerNOMICS?) which SHOULD frighten us all (my Halloween costume idea?)
One thing we KNOW folks have NOT been buying for the holidays — USTs or stocks — at least from what we can derive from most recent (and quite lagging) TICS report. ZeroHedge,
Foreign Official Entities Dumped Stocks, TSYs In August As De-Dollarization Accelerates
Same data point BUT, as always, another potentially VALID INTERPRETATION via Hedgopia
As of August, Foreigners Keep Selling More US Stocks And Buy More Treasury Bonds
… On a 12-month basis, they sold $293 billion worth in August – a fresh record (Chart 1). This is quite a U-turn on their part as they were net long $404.7 billion worth in March last year – also a record. In fact, they remained net long until December, before flipping to ‘sell’ in January and maintaining that posture for the eight months to August.
Incidentally, the S&P 500 peaked in January at 4819 and ticked 3492 last Thursday.
Concurrently, foreigners have been aggressively buying up treasury securities. As of last October, on a 12-month basis, they were selling $39.1 billion in treasury notes and bonds. Then they went the other way. In August, they bought $624.7 billion worth, which was the highest 12-month total since February 2011 (Chart 2).
Foreigners’ love for these securities has persistently risen even as the Treasury has been issuing fewer and fewer of these. The 12-month total of issuance of T-notes/bonds peaked this January at a record $2.76 trillion; last month, this was down to $1.74 trillion.
Issuance DOWN buying UP and, well, here we are … This again, was an AUGUST snapshot …
And a couple / few things / links for those who are like me — VISUAL learners. First up one where 3mo10yr yield curve has not yet inverted … but at least one — Paul Winghart — on LinkedIN has taken up vigil,
Since on LinkedIN and having previously (above) mentioned Lacy Hunt, BBGs Mike McGlone offered this one
For somewhat more mundane chart package — THIS WEEKLY — a walk through global macro from a CHARTS perspective and via 1stBOS may / may not be of interest. MY favs — in no particular order,
Rest assured, MOST see these sorts of charts and don’t think like HIMCO thinks but rather, shops produce stuff like this
LPL: A Lost Decade for Core Bonds?
… within the fixed income markets, because bonds are not only financial instruments, but also financial obligations that pay coupons and principal repayments at par at maturity, the potential for recovery is a bit more certain than in the equity markets that relies primarily on price appreciation. So how long will it take to recover this year’s losses?
While some talking about that lost decade OTHERS are bullish corp debt (via ETFs). Bloomberg,
Bond bulls are getting bolder, despite the seemingly relentless slide in global debt markets. Open interest for call options in two giant bond ETFs -- a good gauge of bullish demand -- has surged close to all-time highs, as my colleague Katie Greifeld noted Tuesday. What's more, the ratio of bearish puts to calls has slumped, another sign of optimism toward fixed-income, for the the $24 billion iShares 20+ Year Treasury Bond ETF and the $32 billion iShares iBoxx $ Investment Grade Corporate Bond equivalent. The bullishness comes amid hints that some traditional buyers of Treasuries from Japanese pensions and life insurers to foreign governments and US commercial banks have at least temporarily stepped away from the market. But unlike stocks, which can quickly turn into value traps, higher yields tend to attract buyers to return to bonds sooner. For one, there is always a steady demand from income investors who are trying to match longer-dated liabilities. ETF investors are sensing now is a good time to get back into bonds, even if central bank rhetoric suggests there could be more downside ahead.
And as Q3 statements hit, here’s how I imagine those meetings to be going,
… THAT is all for now. Off to the day job…