(USTs MIXED, flatter on below average volumes)while WE slept
Good morning and congrats Chiefs and their fans … I cannot recall a superbowl with not a single O-line holding penalty and NO sacks and what, just 2 punts?
… here is a snapshot OF USTs as of 625a:
… HERE is what the shop says may be behind the price action overnight…
… WHILE YOU SLEPT
Treasuries are mixed with the curve pivoting flatter around a little-changed 10yr point ahead of CPI tomorrow.DXY is little changed while front WTI futures are lower (-0.85%). Asian stocks were mixed, EU and UK share markets are modestly higher (SX5E +0.5%) while ES futures are showing +0.05% here at 6:15am. Our overnight US rates flows saw a quiet session in Asia with the curve flattening amid better fast$ selling in the front-end of the curve. Overnight Treasury volume was ~70% of average overall with 30yrs (96%) seeing the highest relative average turnover among benchmarks this morning.… Last Friday's close in Treasury 2yr yields above their January peak (~4.49%) appears to have opened the door to a return to the ~4.80% move high from early November- as we illustrate in this morning's first attachment.
… and for some MORE of the news you can use » IGMs Press Picks for today (13 FEB— and STILL SPORTING THAT NEW LOOK!!) to help weed thru the noise (some of which can be found over here at Finviz).
From some of the news to some VIEWS you might be able to use » in addition TO what was offered HERE yesterday (a few sellside observations) . Global Wall St SAYS:
UBS: Dangerously quiet
Today’s data calendar is a barren wasteland of nothingness—so quiet that even former US Treasury Secretary Summers should find it difficult to justify offering media commentary. In the absence of data, the risk is that idle speculation takes over markets.The release of US consumer price inflation later this week is a likely source of idle speculation. No single data point should ever be taken that seriously, but US Federal Reserve Powell’s June policy errors elevated its importance. This month’s data takes place using new weights. The importance of Owners’ Equivalent Rent has increased, which may raise consumer prices in the near term and lower them longer term.
Owners’ Equivalent Rent is a fantasy price no one pays. It is loosely linked to market rents—with a lag—and so is expected to be disinflationary later this year but is currently adding to inflation. It is worth remembering that while markets may get worked up about the effect on consumer prices, these moves have no impact on consumers’ spending power, because it is a fantasy price.
From another economist,
The Weekly Worldview: Parsing Inflation
Services inflation is getting a lot of press, but the key factors for the near-term lie elsewhere… The bottom line for us is two-fold.First, inflation is coming down, but it will not be a smooth decline. A return to target for inflation was never very likely this year, so patience is required regardless. But second, the recenthigh wage inflation does not spell failure for the Fed. Services inflation is not too far off target, the link from wages to inflation is there, but small,and both services wage and price inflation are trending down despite a strong labor market. I conclude with the mostunderappreciated moment from Chair Powell’s public comments last week. He said he sees inflation getting close to 2% in 2024. When the FOMC did their projections in December, the median forecast was for 3.5% inflation at the end of this year. Evidently, based on incoming data, Chair Powell is pointing to a significant downward revision for inflation in the March forecast.
From one bottom line to another, Goldilocks offers its 2c,
We lowered our 12-month recession probability to 25% (vs. 65% consensus) last week because incoming data have strengthened the case for a soft landing. All four steps of the rebalancing process needed to tame inflation are now underway: demand growth is below potential, the jobs-workers gap has shrunk, wage growth has fallen, and inflation has slowed…
… we see the risks to our 5-5.25% forecast for the peak fed funds rate as tilted to the upside. If the FOMC eventually decides it needs to take a more hawkish path to keep inflation moving back toward the 2% target, we think the most likely option would be add on a longer string of 25bp hikes, not to return to 50bp hikes or to add hikes at last cycle’s quarterly pace.
We do not expect the FOMC to cut the funds rate until a growth risk emerges. A moderate risk would likely lead to something like the 75bp “insurance cuts” of prior cycles, while a recession would likely lead to much larger cuts. Our forecast lightly pencils in cuts over 2024-2026, but we intend these only as a placeholder for an uncertain future date when something goes wrong…
From a few economists view to a macro “HOUSE” view incorporating economics,
Pushing back the pause
Stronger growth prospects could keep core inflation persistent, forcing central banks to become more restrictive for longer… In US rates, we have turned neutral on our tactical short-duration bias, given the recent repricing higher. In Europe, we view risks to outright EUR yields as increasingly balanced. In Japan, we favour positions that hedge against an increase in volatility over positions that earn carry, given elevated uncertainty around the BoJ's policy management …
From economics TO stocks, MS
Timing Is Everything
Price action is not reflective of the deteriorating fundamentals or the fact that the Fed is hiking during an earnings recession—drivers that should ultimately determine the lows for this bear market later this spring. Risk-reward is as poor as it's been in our view.… From a technical standpoint, Exhibit 7 and Exhibit 8 show the key trendline resistance we have been watching for the S&P 500. This is a critical resistance/support line that goes back to the beginning of the secular bull market that began after the Great Financial Crisis. After briefly breaking above this resistance 2 weeks ago, the S&P 500 has fallen below once again and appears to be vulnerable to the bear market resuming just as the consensus has given up on the timing. In other words, investors need to be ready for the cyclical bear to reassert its primary trend immediately.
… Front end rates and the terminal rate continued to climb last week as Fed officials signaled that a longer than expected fight against inflation may be in store following the surprisingly strong January jobs data and a growing expectation for a hot January CPI print (Exhibit 12).
For somewhat more on stocks, a different shop offering an update
U.S. Equity Insights: Thinking at the Margin
The recent rally has been driven by momentum reversal, as well as a rotation toward volatility and low quality laggards. At the midway point of 4Q earnings season, we look to margins as a key risk factor for stocks in the near term, and lower our base case FY23 EPS estimate to $200 (from $207 earlier).
Finally, ahead of CPI tomorrow,
… THAT is all for now. Off to the day job…