(USTs 'sharply' higher as yields driven by EZ markets on robust volumes) while WE slept; beatings in 20s shall continue; "Buying bonds isn’t exciting..." (but that IS the reco)
Good morning … will the real Hobbit please come forward and answer a question? Apparently, Janet felt compelled to speak to the FDIC insured deposit limit (again) and confuse us all even more?
Yellen says Treasury is ready to take ‘additional actions if warranted’ to stabilize banks
The federal emergency refunds to depositors at Silicon Valley Bank and Signature Bank could be deployed again if necessary, Treasury Secretary Janet Yellen told a House panel.
“The strong actions we have taken ensure that Americans’ deposits are safe. Certainly, we would be prepared to take additional actions if warranted,” said Yellen.
The statement conveyed a different message than Yellen’s remarks a day earlier, when she told senators that Treasury was not considering any plans to insure all U.S. bank deposits without congressional approval.
The banking system is sound and oh, she signs out nations currency.
Wonderful. As ZH put it
Good to morning everyone including those fan fav analysts from a rather large German bank …
Deutsche Bank shares slide 8% after sudden spike in the cost of insuring against its default
You know its bad if CNBC talking about it as BBG (via ZH) noted this a few days ago?
EU Contagion Risk Spreads As CDS Market Puts Focus On Deutsche Bank
and update as of 4p yest,
… here is a snapshot OF USTs as of 705a:
… HERE is what another shop says be behind the price action overnight…
… WHILE YOU SLEPT
Treasuries are sharply higher and playing catch-up to heavy rallies in peer markets in the UK and Germany as banking stresses still percolate (SX7E -6.5%). DXY is notably higher (+0.7%) while front WTI futures are notably lower (-3.9%). Asian stocks were little changed but EU and UK share markets are all in the red (SX5E -2.5%, FTSE 100 -1.8%0 while ES futures are showing -0.85% here at 7:05am. Our overnight US rates flows saw a tranquil Asian session with intermediates holding firm all session despite sparse desk flows. The tranquility was shattered during London's AM hours with very good buying and receiving- mostly front-end focused. Overnight Treasury volume was ~130% of average overall.
… Our next attachment showing the weekly chart of the 10s20s30s 'fly reinforces the idea here that when vol goes stratospheric... 20's have the most to lose on curve with convexity playing at least a part-role. Medium-term, weekly momentum (lower panel) aims solidly higher whilst sitting far from 'overdone' levels. So looks like the beatings in 20's on curve will continue.
… and for some MORE of the news you can use » IGMs Press Picks for today (2 MAR) 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. Global Wall St SAYS:
First up from a rather large German institution with a chart somewhat related (ok maybe NOT even tangentially so BUT) to the Hobbit’s US DOLLAR (visual above),
Dollar demand spurs record FIMA repo borrowing and Treasuries liquidation
The subdued usage in the Fed’s central bank liquidity swap lines may be masking the true extent of global dollar demand. In the Fed's latest H.4.1 release, two data points jumped out. First, the FIMA repo facility saw a record increase to $60bn from $0 in the previous week. This facility enables foreign central banks to borrow dollars against their securities held in custody at the New York Fed, offering a comparable rate to the liquidity swap lines but without disclosing the borrower's identity. Since the increase matches the per counterparty limit of the facility, it is conceivable and even likely that a single counterparty was responsible for the entire borrowing.
Secondly, foreign-owned Treasuries held in the Fed's custody fell sharply by $76bn. This marked the largest weekly decline since March 2014, when Russia was thought to be behind the shift in response to Western sanctions and a falling ruble. Movements in the Fed's FIMA facility and custody holdings suggest that the central bank either lacked access to the swap lines or opted to raise dollars anonymously via repo and by liquidating their securities. In case of the latter scenario, protection of identity may have been a factor to help maintain public confidence and prevent further market turmoil.
Despite of, or perhaps owing to, the central bank actions, short-end FX bases continued to recover from their recent lows and were not showing much funding stress this week.
AND so … the plot thickens … shifting focus over to another top of mind analyst from same rather large German bank, this from a fan fav analyst and an early morning reid,
… The renewed weakness in banks yesterday actually started in Europe with the STOXX Banks index down -2.27%. The STOXX 600 recovered from an intraday low of almost -1.0% to finish -0.21% lower overall. CDS markets highlighted the stress in European financials as the Subordinated Financial CDS index widened (+20bps) for the first time since last Friday – before the CS-UBS merger news – while the Senior CDS index was +9bps wider. In the US, the Regional bank ETF, KRE, was down -2.78% yesterday whilst the broader KBW Bank index was -1.73% lower as liquidity concerns of the smaller banks continue to permeate.
Staying with bank liquidity, after the US close last night, the Fed’s weekly balance sheet data showed that the use of the Fed’s discount window was down from $153bn to $110bn, while the credit deployed to SVB and Signature was up from 143bn to 180bn, and lastly the new emergency bank lending facility (BTFP) was up from $12bn to $54bn. So net of the two failed banks there was little change, indicating that banks were not finding it necessary to access cheap capital. The market should look favourably on that from a contagion standpoint. Overnight S&P and Nasdaq futures are both up around +0.2% and 2 and 10yr UST yields are both around -4.5bps lower as we go to press.
And NOW we wait. Paul Donovan of UBS,
What have we learned this week? Remarkably little. Economists have been wrestling with real-time economic data that has become progressively less reliable as structural change has swept the economy. Now the aftermath of the first bank runs of the Twitter era only adds uncertainty. The future depends on two hard-to-predict behaviors: will bank investors and depositors keep moving their money? And if they do, will loan officers respond by tightening lending standards? Central banks will know what is happening before markets do….
And for those who like to be late to the game AND have a pension for eye candy (ie CHARTS), from the operation calling themselves allstars,
It’s Time to Get Bonds Back into the Fold
The Federal Reserve handed down a 25-basis-point rate increase on Wednesday.
And Fed Chair Jerome Powell implied an impending pause in the hiking cycle.
You know what this means…
It’s time to buy the four “Bs” – Bonds, Bitcoin, Big-Tech, and Bullion…
… Today, I’ll highlight bonds with a couple key levels to trade against as we add these assets to our portfolios.
First up is the 7-10 Year US Treasury ETF $IEF:
It’s not there yet. But if and when IEF reclaims the critical shelf of former lows at approximately 100, we’re long!
The next potential resistance level hangs overhead at last year’s August pivot high of 105.75. This is a logical level to take profits or “feed the ducks.”
But these trades are more about adding bonds back into the mix after last year’s historic sell-off. These aren’t quick, tactical swing trades.
Here’s another one, the 3-7 Year US Treasury ETF $IEI:
It’s an almost identical setup.
We want to buy IEI on strength above the 2018 lows at approximately 118. If it’s above this level, we’re eyeing potential resistance at 121.50.
Buying bonds isn’t exciting.
These aren’t your vehicles if you’re looking for fast, explosive gains. Plenty of beat-down tech names will likely rally with bonds if that’s what you’re after.
Bigger picture: We want to buy bonds again! That alone speaks to a drastic change in the market environment and the 60/40 portfolio!
It’s all about rates falling, not ripping higher.
And finally for the inner stock jockey, a few words from a large British shop,
Food for Thought: Hide and Seek
Events of the last two weeks sparked significant repositioning among sectors. Without any meaningful changes to the fundamental earnings outlook, investors looking for places to hide from the banking fallout have shifted the valuation landscape, expanding multiples for Tech while leaving Industrials at a better entry point.
As the day begins AND the week draws to a close, I’m once again in awe of price action and volatility on the front end of the yield curve … I’m reminded of one shop suggesting we watch how 2yy closes in relationship TO 4.032 at MONTHS END. While there’s clearly plenty of ‘golf’ left to play, it certainly DOES make one pause and think … That visual again,
AND given it’s bonus season on Global Wall Street,
Mercifully … THAT is all for now. Off to the day job…HOPE to have some ‘stuff’ out over the weekend!!