while we slept; Dr Doom WARNS; GDP f'casts come in; eurodollar curve may be right? #got5s?
Good morning.
THE headline stealing the morning (so far) is of Russia cutting off gas to both Poland and Bulgaria (RTRS version here). Thankfully it is spring time but unfortunately, Putin knows what he is doing and there are repercussions yet to be fleshed out but rest assured, the markets and pundits will do so, eventually.
Perahaps they’ll be interested OR will learn something from this afternoons liquidity event, 5yy (daily) which looks to be at a shorter-term fork in the road
After yesterdays, Stellar Demand, Record Low Dealers in BLOCKBUSTER 2Y Auction, I cannot WAIT to see what 1pm brings. Meanwhile, here is a snapshot OF USTs as of 707a:
… HERE is what another shop says be behind the price action, you know,
WHILE YOU SLEPT
Treasuries are lower and the curve flatter this morning as global stock markets stage a modest rebound along with commodity prices. DXY is higher (+0.3%) while front WTI futures are modestly higher (+0.4%). Asian stocks saw Chinese shares rebound (CSI 300 +2.94%) while most other Asian exchanges fell, EU and UK share markets are all in the green (SX5E +0.6%) while ES futures are showing +0.9% here at 6:30am. Our overnight US rates flows saw a roller coaster trade during Asian hours: prices dipped early when Aussie CPI scored a topside beat, rallied back and then sagged again on the back of better real$ selling in intermediates and the long-end. Overnight Treasury volume was notably elevated in 2's (194%) but close to average elsewhere on the curve.
… and for some MORE of the news you can use » IGMs Press Picks for today (27 April) to help weed thru the noise (some of which can be found over here at Finviz).
In as far as a few other items which are catching my eyes and making ME stop and think about allocation, 60/40 and the balance of the year … some CHARTS
KIMBLE: Treasury Bonds ETF (TLT) Testing Important Long-Term Price Support!
1stBOS weekly macro charts and cross asset themes,
* In contrast, the deteriorating risk sentiment and recent rally in rates markets is leading to a pause in USDJPY below the 130 psychological barrier as we expected. Nevertheless, the long-term trend is clearly to the upside in our view and we would fade selloffs from here…
* …in line with our view that the recent pullback in 10yr US Bond Yields is corrective only, ahead of an eventual rise to 3.21/26%.
THEN, this tweet from EPB …
… is one that makes you stop and think …
DBs Jim Reid is also in THINKING mode as well as ADVERTISING mode,
… Staying in advertising mode, yesterday saw DB’s Head of Research and Chief Economist David Folkerts-Landau publish an important piece alongside Peter Hooper and myself. In our World Outlook earlier in the month, we became the first bank to forecast a US recession by the end of 2023, but in this note we argue that if anything, the risks are skewed towards a much more significant recession. Indeed, we find it bizarre that consensus forecasters expect us to believe there’ll be a soft landing from a starting point at which a soft landing has never been achieved. We outline the full rationale in the report, but our view is that the Fed is behind the curve in a manner unseen in a generation, that inflation is going to prove a lot stickier than expected, and hence monetary tightening will push the US economy into a significant recession, with unemployment ultimately rising several percentage points. The link is here…
… A summary indicator of how far behind the curve the Fed is now
In light of the above observations, it is generally accepted that the Fed has fallen significantly behind the curve and that substantial monetary restraint is now needed. To drive this point home, we adopt a quantitative measure introduced recently by our US Economics team that gauges how far the economy has strayed from the Fed's mandates of price stability and maximum sustainable employment.4 The index in Figure 2 below shows the sum of the amount (in percentage points) by which inflation exceeds the Fed’s 2% target objective plus the amount (in percentage points of unemployment) by which the labor market is estimated to have tightened beyond its sustainable full employment level.5 We have labeled this index the Fed’s “misery index,” given its similarity to the national misery index, which is simply the sum of inflation and unemployment.Positive readings in the chart indicate that the Fed has work to do in a tightening direction: inflation is too high and or unemployment has moved too low to be consistent with stable inflation. It is noteworthy that in the past, every time this index has moved noticeably above zero, the economy has gone into recession within a few years as a result of monetary tightening. On this basis, the Fed is currently much further behind the curve than it has been since the early 1980s. In the past, higher levels of the index as we are seeing now, have tended to be followed by more aggressive Fed tightenings and more severe recessions. It is also of interest that the several successful “soft landings” achieved by the Fed that Chair Powell has cited recently—that is tightening episodes in the mid-60s, mid-80s, and mid-90s that were not followed by recessions--occurred when the index was essentially at zero. 6 Those were very different environments from the challenging one the Fed faces today, and the Fed was generally acting much more preemptively than it is now…
Yesterday I mentioned a link to how it was TINA was dead and this morning, I’d note this from Barclays stock jockeys,
TINA mindset in jeopardy
TINA mindset for equities is in jeopardy as rates have repriced and inflation narrative is starting to reverse. MF/retail capitulation is a risk if growth scare intensifies, although light HF positioning offers some cushion. Leadership is concentrated in commodities, while financials and core cyclicals have been sold…… Bonds-to-equities rotation is stalling
Equities had further inflows in April, but the pace has slowed materially vs. previous months. In fact, equities have started to see outflows most recently: last week’s outflows from global equity funds amounted to $17.5bn, the biggest since December last year. As a result, the 4-week rolling equity flows from mutual funds have turned slightly negative, for the first time since Sep’20.Retail investors continue to favour equities over bonds, according to the Charles Schwab data. However, conviction seems low and we note the sentiment index from TDam has rolled over notably, despite the fairly resilient equity market.
In the ‘every dog has its day’ camp, well,
'Dr. Doom' Warns Of The Gathering Global Stagflationary Storm
-Project Syndicate
This is a similar type of thing which I read and slowed me down and I’ve yet to fully comprehend (and believe it’s not one of those things which have clear and present or INSTANT ‘trading’ implications). Similar to the latest HIMCO QUARTERLY .
Finally, it would seem that HIMCO, EPB, Dr DOOM et al may be on to something which the eurodollar curve has been flagging for some time. BLOOMBERG NOTED
… Now, just a week before the Fed is expected to carry out its first half-point hike in two decades, a slew of major earnings is fueling concerns about a weaker outlook in the coming months. Stocks have spiraled to fresh lows, underscoring alarm bells that have been ringing in the eurodollar curve for a month or so, with futures signaling a better than 50% chance that the second half of next year will see the Fed cutting rates.
Seems as though the various warnings are NOT just a one-off as a rather large British operation out just a short while ago with this,
Q1 GDP forecast revised down 1.2pp, to 0.5% q/q saar
We revise our forecast for this Thursday's advance Q1 GDP estimate to 0.5% q/q saar, in line with changes to our tracking estimate since Friday. The change mainly reflects historical revisions to the monthly trajectory of retail sales released on Monday, which will shift growth from Q1 22 to Q2 22.
-Barclays
Or, said another way … all is fine
or perhaps this
Okie dokie … THAT is all for now. Off to the day job…