while we slept (degrossing theme); war = growth deflation; high debt NOT economic problem; agree or NOT with Bill (de)GROSS(ing)
Good morning. Stocks and bonds both down (price) on very little news over the weekend. BA having its own difficulties but jumping right in, here’s what happened
… WHILE YOU SLEPT
Treasuries are bear-flattening, while the DXY has modestly benefitted from some light risk-aversion in London trade after the Japanese holiday period. EGBs are slightly underperforming here as the ECB's Lagarde dismissed stagflation fears after German PPI inflation jumped to nearly 26% this AM. BTP 10s are +5bps, while Eurostoxx are marked slightly higher here at 7am. Crude is rallying +4.5%, while S&P futures are flat…… "Silence is a statement that is open to gross misinterpretation.” - Craig Bruce
… With macro portfolio de-grossing a salient theme YTD, last week’s ‘blow-off’ top type moves across conflict/liquidity proxies like wheat, gold, FRA-OIS, MOVE index, 10s20s30s bring to the fore relevant questions of whether the Russia-Ukraine pivot to ‘Plan B’ and displacement of first hike jitters can engender a more subdued vol environment (bear-flattening, credit/MBS stability, tech outperformance). We are sympathetic to the view over the near-term, but have ample medium-term concerns when the Fed Chair states things like “the need is one of getting rates back up to more neutral levels as quickly as we practicably can and then moving beyond that”. In the near-term, RPM positioning indicates we remain in a ‘short momentum’ phase, the post-FOMC trading window so far seeing a reasonable addition to short side (at $12m/ z-score 2.5) with positioning overall in an extended short (95th percentile), but with profits at the front end (extreme) and building across the curve (large), meaning little positional urgency as vols stabilize. Our only real concern over a ‘pain-trade’ is in the 30y point, where very large shorts (at -$16m / 95th percentile) have seen profits stagnate after FOMC day saw a technical bounce off the 2.51% yield highs from last year. We also note daily momentum is perilously close to a bullish crossover, while RSI suggests the latest press up to 2.50% came on a negative momentum divergence.
US 30y yields: consolidating beneath the 2.51% (highs from last March), with momentum now curling in oversold territory (and RSI diverging bullishly).
… and for some MORE of the news you can use » IGMs Press Picks for today (21 March) to help weed thru the noise (some of which can be found over here at Finviz).
CNBC: Treasury yields climb as focus remains on Russia-Ukraine war
For somewhat more (about less over the weekend), a large German banks very early morning read,
As the (bond)beat goes on, bonds and stocks both for sale, a few things from global Wall Street this morning worth noting.
In the ‘dont worry, be happy’ camp, the latest from Goldilocks
The firm followed this with THIS — which looks largely ‘GOOD’,
As far as the war goes in context of inflation and deflation, a few words from UBSs Paul Donovan,
The balance of inflation and deflation
… Growth deflation remains the most likely outcome of the ongoing war. Higher commodity prices will cause consumers to reduce demand of other products and services. Expect an increased political focus on corporate profits. Commodities are a very small part of developed economy consumer prices, and any profit margin gains are likely to become a focus for popular discontent …
For a(n equity and curve inversion) chart or two, HEDGOPIA,
After Last Week’s Huge Rally, Major US Equity Indices At/Near Crucial Resistance
Finally, from the guy nobody listens to any more (save for ZH and apparently an editor for the FT) comes the following
ZH: Bill Gross Warns Fed Rate Hikes Will "Crack" US Economy And Housing Market
… that’s all for now. Off to the day job…