while we slept; expect recession probabilities to RISE; Japanese investors net SELLERS of USTs (again); (Dr.)Copper's big break comin'; "Bear Sighting and Safety Tips"
Good morning…as IF you had nothing else better to do before this mornings all important ECB meeting (see yesterdays charts of Bunds and 10s/bunds for somewhat more)!?
Stocks PUKING middle of the day (ZH notes SEC reasoning) did NOT seem to help or prevent 10y auction from tail/spinning miserable results (ok it wasn’t THAT bad, even ZH only called it MEDIOCRE … as buyers balk ahead of tomorrows CPI).
And while CPI likely to take brunt of the blame for the selloff yesterday, well ZH
Stocks Puke Into Red After SEC's Gensler Proposes Major Market Structure Change
Any or all of this make you wanna jump in and be the first on your block to buy some new (actually reopening, but who really cares about those details) 30yy at this afternoon’s liquidity event? Here’s a WEEKLY look at 30yy for some frame of reference (with an hourly inset — concession needed)
For somewhat more robust run through of what to expect and of the setup ahead of 1pm, DBs Statistics and charts on demand, positioning and relative value
Treasury will sell $19bn 30yr bonds (2.875% of 5/52s) at 1pm today, $1bn less than the April reopening auction. Fed SOMA add-on will raise the total issuance size by $1.12bn.
Thirty-year bond yields have risen 17bp since the last auction stop-out level and are currently trading at about 3.17%. The 5s/30s and the 10s/30s curves have tended to fall coming out of recent 30 year bond auctions.
High indirect participation (69.7% vs. 65.4% 12m average) offset a decline in direct bidders participation, which fell to 16.6% in May from 18.9% in the previous month, and the end-user demand increased to 86.3%, compared to the 12m average of 83.0%. High indirect participation coincided with strong investment funds demand, according to allotments data.
The May auction stopped through by 0.7bp and the bid-to-cover ratio improved to 2.38 from 2.30 in the previous month. However, the 3yr and 10yr note auctions held earlier in the week tailed with small indirect participation.
Treasuries in 11yr+ maturities held by primary dealers for the week ending on May 25 was $46.2bn (91th percentile vs. last 3m history).
… here is a snapshot OF USTs as of 720a:
… HERE is what another shop says be behind the price action, you know,
WHILE YOU SLEPT
Treasuries are aggressively mixed and the curve flatter this morning ahead of the ECB and tomorrow's US CPI print. DXY is modestly lower (-0.12%) while front WTI futures are UNCHD. Asian stocks were lower on balance (China names -1% roughly), EU and UK share markets are all modestly lower but ES futures are showing +0.5% here at 7am. Our overnight US rates flows saw FV block buys during Asian hours again (two blocks totaling almost 400k/bp together) before a block sale(?) in Tys hit ~90mins ago. Our cash desk flows were muted (fast$ a back-end seller). Overnight Treasury volume was still around 125% of average overall with some standout volume (207%) seen in 30yrs ahead of this afternoon's auction.… US news: Flows into government bond ETFs surged to a record high in May as investors embraced a more defensive posture FT A fire at a US LNG export plant roils the global energy markets RTRS North American fertilizer prices have come of the boil since early April GM Shrinkflation is real AP
… Japan's MOF net foreign bond flow: Since mid-January Japan has been a notably or largely consistent net seller of foreign bonds. The latest week added to that lengthening string of weekly selling.
… and for some MORE of the news you can use » IGMs Press Picks for today (9 June) to help weed thru the noise (some of which can be found over here at Finviz). And FROM todays IGMs Press Picks, here’s top story from overnight and the SCMP,
China export growth rebound 'likely to be a temporary blip' – South china Morning Post China's exports grew by 16.9 per cent in May compared with a year earlier, while its imports grew by 4.1 per cent last month, data released on Thursday showed.
In as far as Global Wall St wiz kids go,
ABNAmro: Raising our Fed and ECB rate hike forecasts
We have raised our forecast for rate hikes for both the Fed and the ECB. We now expect the upper bound of the Fed’s target range to reach 4%, though we also expect the Fed to start cutting rates again by the end of next year. We now expect the ECB’s deposit rate to reach 0.75%. Both peaks are seen in February 2023. We will also downgrade our growth expectations for both the US and the eurozone for next year, and make adjustments to our bond yield and FX forecasts, given our projection for more rate hikes. More details on the macro and market implications will follow next week.
Luzetti of DB: Expect recession probabilities to rise
Two months ago we adopted a baseline view of a recession occurring by the end of 2023 (see "US outlook: This time is not different for Fed tightening fallout"). That call was based on our expectations that the Fed would have to move more aggressively to ultimately tame inflation pressures and bring the labor market into better balance. With the economy the furthest away from the Fed’s targets in forty years, we viewed prospects for a soft landing as sufficiently low to make a recession a strong base case.
While expectations for a recession have become more mainstream – indeed fears have accelerated relative to our baseline – our preferred recession probability models have not signaled urgency about these risks. In fact, our most comprehensive recession probability model currently puts a less than 5% probability of a recession over the next twelve months and less than 20% over the next twenty-four.
In this piece we take a deeper dive into these models and assess what they are saying about recession risks next year. Our main conclusion is that forward-looking recession probabilities are likely to look far more pessimistic as we move into 2023, with recession probabilities moving well above 50% a year from now.
Paul Donovan/UBS:
Differentiating supply from demand
… Today’s ECB meeting gives ECB President Lagarde an excuse to speak in public (not that any excuse is needed). The move to end the savings tax of negative interest rates is firmly established in market expectations, and this meeting will lay the foundations for that. Of more interest is the approach to managing government bond markets.US weekly initial jobless claims data is due. The US labor market will matter more as an anti-recession force, but firms are less likely to fire workers and more likely to slow the pace of hiring of workers in the coming months (making initial claims a less useful data release).
Finally, NWM recaps JPY investor flows
Japanese investors were net sellers of foreign sovereign bonds in April - to the tune of €19bn - for the third consecutive month. Majority of the selling comprised of the US sovereign bonds – marking the sixth consecutive month of sales, and the largest six monthly outflow on record. On the European side, there was small scale buying in Italy, France and the UK, and small scale selling in Germany. Japanese investors were also buyers of Australian sovereign bonds in April.
… Majority of the outflows were in USTs. Japanese investors sold €17.6bn of USTs in April, marking the sixth consecutive monthly outflow at a total of €80bn, the largest six monthly outflow on record (most of which has come in 2022). The sales in April compare to €13bn buying in the same period last year.
… Japanese net monthly buying flows of USTs
And finally, from the CHARTS department, a message from Dr Copper (via Kimble)
Why Doc Copper Is About To Experience A Big Move!
Seems the ‘Metals’ arena may be nearing a bigger move.
Earlier this week, we touched on precious metal Silver, and now we will turn our attention to the industrial metal Copper.
Today’s chart is a long-term “monthly” chart of Copper, highlighting why we may be at an important juncture.
As you can see in the chart below, copper has produced a couple of double tops at each (1), as well as some considerable bounces off price support (green line).
Right now, copper is testing resistance. It’s still in question whether the two longer wicks will produce a double top, or whether this is part of a bullish consolidation construct between $4 and $5.
If it’s a double top, copper could see a large decline. But if it’s bullish consolidation, ethnically copper could be headed to the 1.618 Fibonacci extension up near $7.
This is shaping up to be another important metals situation. Which way will copper break? Stay tuned!
One way or another, everyone’s inner global MACRO might be interested to see which way the break is … Another email which may / may not be of interest to everyone’s inner global MACRO arrived yesterday afternoon, into MY inbox about 4p as the stock market was closing. This was addressed to all the residents of the town I just left (sort of) so, is now not a direct impact BUT, still some food for thought
Dear Resident,
It has come to my attention that local bear sightings have been reported on social media. As of the writing of this letter, there have been no confirmed bear sightings in Marlboro Township. That being said, there have been confirmed sightings in neighboring towns and so I am reaching out with safety tips should you encounter a bear.
Black bears by nature tend to be wary of people. If you are indoors, stay there and call the Police at 732-536-0100 or the DEP hotline at 877-927-6337 (877-WARN DEP).
If you encounter a black bear while outdoors, follow these safety tips:
• Do not feed bears, leave food/garbage out, or approach a bear.
• Remain calm if you encounter a bear. Do not run from it; running may trigger a chase response.
• If you encounter a bear that is feeding, do not approach it and slowly back away. A bear on a food source will aggressively defend it.
• If you are outside and from a safe distance, make the bear aware of your presence by speaking in an assertive voice, singing, clapping your hands, or making other noises. Use an air horn, bang posts, yell, etc.
• Make sure the bear has an escape route. Don’t trap the bear.
• Avoid direct eye contact, which may be perceived by a bear as a challenge. Never run from a bear. Instead, slowly back away.
• Make yourself look as big as possible by waving your arms. If you are with someone else, stand close together with your arms raised above your head.
• The bear may utter a series of huffs, make popping jaw sounds by snapping its jaws and swat the ground. These are warning signs that you are too close. Slowly back away, avoid direct eye contact and do not run.
• If a bear stands on its hind legs or moves closer, it may be trying to get a better view or detect scents in the air. It is usually not a threatening behavior.
• Black bears will sometimes "bluff charge" when cornered, threatened or attempting to steal food. Stand your ground, avoid direct eye contact, then slowly back away and do not run.
• Pairs or groups of people should stay together and perform these actions as a unit when they encounter a bear; do not separate and do not move in different directions.
Black bear attacks are extremely rare. If a black bear does attack, fight back! Aim for the snout and/or eyes. Use anything at hand: (knife, sticks, rocks, binoculars, backpack or kick the bear.)
Through May, 2022, the state reports three confirmed bear sightings in Monmouth County. It is important to note that in some instances, the pictures being shared on social media have been taken in other areas and even other states. That being said, I have always encouraged residents to be prepared. You can read more about bear safety tips, how to avoid attracting bears and what to do if you do have an encounter on the State DEP website: https://www.nj.gov/dep/fgw/bears/bear-encounters.html
I will update as necessary. In the meantime, please review the safety tips in this letter and on the DEP website with your family.
Mayor Jon Hornik
Wait, what? An ACTUAL BEAR SIGHTING? As in, the animal? Like we didn’t have enough to worry about with prices at the pump rising, paychex losing ground each and every day, war in Ukraine and a potential food crisis and with Covid and Monkey, be like
Nevermind More (or less) later … THAT is all for now. Off to the day job…