Until something breaks; a FLY to consider (for the haters)
MS (via ZH) and a technical look at rates (via GoKAL)
Couple of things from the inbox which I thought worth posting (but not blasting out email) … Both have some funTERtainment value, IMO. First from MS,
Since it was, in its entirety, up on ZeroHedge.com, I’ll simply refer you to THIS POST for details … Here’s the part which caught MY attention
… Indeed, it would seem for the moment that central banks are increasingly comfortable pushing a more hawkish line until something pushes back. And so far, nothing has. Equity markets haven’t fallen, credit spreads are steady, and yield curves have steepened over the last month (the opposite of what you’d expect in a policy mistake). Why stop now?
For markets, therefore, our strategy still leans into the idea of a more hawkish tone to start the year. Our FX team remains bullish on the US dollar, while our US interest rate strategists remain negative on duration, especially in real rates. We think that this combination should be negative for gold but supportive for financial stocks, both in the US and around the world…
Again, HERE is full post on ZH which hit inboxes earlier on this morning.
I cannot agree more or say it differently / better. Fed will keep pushing and the markets will keep reacting …
Now in as far as what one might DO about it with regards to the rates market, a look at 5s, via GoKAL …
Rapid widening in 2s5s, which is more sensitive to policy outlook, and flattening of 5s30s, which reflects angst over longer-term growth, has seen the 2s5s30s fly erupt higher and turn positive again; at 1.24bps, we think it can go on to break above 8.5bps, aided by the MACD belly ‘sell’ signal
IF/when the world follows along and is aggressively short enough THEN - and maybe then - can/will buyers come in and say enough is enough.
For NOW, though, as noted HERE, the short positions is only just being built in rates.