Good morning … They say ‘absence makes the heart grow fonder’ but I gotta be honest with you, after an extra day celebrating Father’s Day (and June Teenth), many more holes of golf than I’ve played in awhile, I could get used to that … Alas, it’s time to get used to ‘this’ … and so, the very first chart I checked was of the belly of the curve … 5s,
AND it is that uptrending (RED) line in / around 4% which strikes ME as a level to watch … and so, for now, I will but first … here is a snapshot OF USTs as of 705a (via TradingView as my normal source isn’t, well, sourcing):
seems stuck to ME and fingers crossed it all comes back online soon and so … HERE is what ONE shop says be behind the price action overnight…
… WHILE YOU SLEPT
Treasuries are cheaper and slightly steeper, catching up to EGB long-end led weakness post-holiday. Asia stocks are leading risk-asset downside for a second straight day as the smaller than expected Chinese rate cut (1y LPR -10bps, 5y LPR -10bps) saw a ‘sell the news’ reaction. Property sectors (SHPROP -1.7%) proved a drag on the mainland, though the NKY (+0.1%) and KOSPI (-0.2%) held in OK. Citi economists lowered China 2023 GDP growth estimates from 6.1% to 5.5%, while HK 1m Hibor reached highest level since 2007 amid FX pressure. The RBA minutes were widely viewed as marginally more dovish, AUS bills rallying as much as -12bps and the 3s10s curve steepened +9bps, the market trimming RBA pricing - July now at +13bps (vs +15bps prior). This lead to some steepening pressure overnight (US 2s10s +1bp), though real yields are higher in digestion of last week’s hawkish commentary (Waller). Our London desk noted decent buying in intermediates while RM were modest sellers in long-end. Volumes are running at ~110% (30d ave) focused in intermediates.
… and for some MORE of the news you can use » IGMs Press Picks for today (20 JUNE) to help weed thru the noise (some of which can be found over here at Finviz).
Something NOT on this morning’s press picks BUT worth noting, is an interesting story on the status of the jobs market worldwide where a quarter of workers looking to change jobs, up from one in five, in latest PWC Global Workforce Survey of 54,000 workers in 46 countries…
From some of the news to some of THE VIEWS you might be able to use… here’s what Global Wall St is sayin’ … and in addition TO what little was noted HERE over the long weekend, where in as far as Global Wall Street inbox and link-A-palooza, a couple items stood out to ME
BMO — forced outta tactical steepeners and sets forward entry dip BUY (10s)
GS, “Markets appear considerably more optimistic than we are about the pace of inflation normalization”
MS adds FFVSH4 flatteners — bullish leaning trade w/protection against hikes
And from then to here and now - a couple links which may be of interest / funTERtainment value,
ABNAmro: US recession to start in Q4; Fed cuts delayed to March
…In quarterly terms, we now expect growth to be stagnant in Q3 after growing modestly in Q2, and for this to be followed by a contraction in output in Q4 2023, which continues into Q1 2024. Given the later expected onset of recession, we also delay the expected recovery to later in 2024. The net result of these changes is to drive an increase in our 2023 annual average growth forecast – to 1.4% from 0.7% previously – but for this to be more than offset by a large downgrade to our 2024 growth forecast, to just 0.3% from 1.6% previously.
… Fed rate cuts now to begin in March 2024 …
BNPs Sunday Tea: Central banks wrestle for inflation control
Goldilocks ASKS: Labor Market Rebalancing: How Much Is Enough?… We expect the unemployment rate to remain around current levels for the foreseeable future. We suspect that much of the increase in layoffs so far is simply the flip side of moderating labor shortages. It has become easier for companies to hire in a more balanced labor market this year, but this also means they have become more willing to lay off workers who are not performing well because the alternative is no longer simply being understaffed….
MS on STOCKS: From Fear to Greed
Investor sentiment and positioning has turned 180 degrees at an inopportune time, in our view. Fading fiscal support, less liquidity, and the impact of inflation falling faster than expected contribute to our 2H23 caution.
Exhibit 2: Proprietary Morgan Stanley "Risk Demand" Index is back to extreme level with a Negative Divergence
MSs weekly economic WORLDVIEW: Engaging the Debate
We cover the debates and push back we have heard from clients following the Mid-Year Outlook. First, is the prospect of a Chinese rebound. Second, is the debate on 'skips' versus 'pauses' by central banks, and third, is economics versus risk assets.
MSs Sunday Start: The Beyoncé Effect
Under the heading of “this time is different,” Swedish inflation made global headlines. Beyoncé’s global tour started in Stockholm last month, and hotel and restaurant prices drove a notable upside surprise to Swedish CPI (well, an upside surprise to markets, less of a surprise to our resident member of the Beyhive)…
… As the Fed met this week, the market was pricing in a “skip.” The Fed did not hike, but its “dot plot” pointed to two more hikes this year. Should a skip be the base case? Well, Chair Powell corrected himself for using the word “skip.” But the lesson from the RBA and the BoC is not that we should expect a resumption of hikes, but rather that we should not be surprised if hikes resume when data do not cooperate. The Beyoncé effect should keep us from getting too complacent.
Our US team forecasts notable further deceleration for both payrolls and inflation before the July meeting. If our forecast for CPI is realized, the Fed’s forecast for inflation will have to get revised down, and Chair Powell’s insistence that the “July meeting will be live” will likely be rendered moot. A resumption of hikes, therefore, is simply not our base case. But I will repeat a point I have made in the past. The Fed might be done now only to resume hikes much later. Recall that in 1996, after a very slight reversal of a similarly rapid hiking cycle, the Fed held policy constant for a year, only to have the next policy move be a hike…
And in as far as this humble spot on the web goes, it remains to be driven by a human and so, my apologies for lack of all the glitz and glam offered BY AI … Here’s an idea of the, "Impact of ChatGPT"
AND … THAT is all for now. Off to the day job…
I think WOLF STREET has the best description of ChatGP and all the other hot AI names: AI, like humans, is good at producing Fluent Bullshit. See the lawyer who used ChatGP to writer up his court arguments; and the AI cited 6 cases that didn't exist; the AI simply Made Them Up. Which in retrospect, is the logical conclusion.
While it wasn't a 3-day wknd for me (I work Sun-Thurs) I know exactly what you mean. After 2 days of insanely great mid-June Tahoe area skiing, returning to Folsom, CA Saturday afternoon knowing that back to work was 15 or less hrs away, was downright depressing!