while we slept; from PPT to FRB(Dallas); real wages tumbled; 'Thursday the 12th' and... 'bonds warn of trouble'
Good morning…stablecoins they called it…no, wait, this is an hourly visual of long bonds post CPI
This is a lot of ground covered especially out in The Land of the BIG DV01s. The moves have NOT been limited TO long bonds or (un)stablecoins but also BIG TECH. John Authers morning note shows worst 5d selloff since pandemic
Back TO BONDS … Here’s one more for context. I call this one, Fun With TLINES (Daily where momentum moving from oversold closer TO overbought)
These visuals may / may not help as you plan your 30yr auction day trades and TRADE your 30yr auction day plans. Some more in a moment.
Meanwhile, back in Gotham, the Dallas Fed just appointed Lorie Logan — the head of the PPT — as it’s new president (snark courtesy of ZH but hard to escape the irony) and to be sure, I’m not 100% certain as to THE correct messaging or takeaway.
This ‘news’ comes as real wages are tumbling and real$ buyers steered clear of yesterday afternoons ‘liquidity event’.
… an ugly tailing dealer led 10yr auction it was did come on the heels of a HOT CPI so perhaps common sense, which typically ain’t so common, did exert itself?
ZH on CPI and the lack of wage growth
CPI printed HOTTER than expected in April and real wages TUMBLE (13th straight month)
I suppose the Biden speech was in attempt to steal thunder from the lack of wage growth and I’m sure the admin officials are thrilled to see some ROE V WADE distractions from the ‘flation. Will any / all this persist into / through November midterms OR … dare I ask if the current angst (geopolitical and market-wise) will be … gulp … TRANSITORY?
… here is a snapshot OF USTs as of 716a:
… HERE is what another shop says be behind the price action, you know,
Overnight Flows
Treasuries continued to rally, and the curve flattened further in the wake of Wednesday’s CPI and 10-year auction. Overnight volumes were particularly strong with cash trading at 224% of the 10-day moving-average. 10s were the most active issue, taking a 34% marketshare while 5s were a distant second at 29%. 2s and 3s combined to take 23% at 13% and 10%, respectively. 7s managed 10%, 20s 1%, and 30s 4%. We’ve seen two-way flows in 10s.
These flows are from BMOs morning thoughts serving as a very distinct reminder, of sorts, “Thursday the 12th” with a weekly look at 30yy to consider ahead of this afternoons liquidity event where they note,
… Supply concludes with Thursday’s long bond refunding, and unlike 10s which have a strong tendency to perform well at their new issue supply events, 30s show a far weaker trend. The last eight consecutive long bond refundings have all tailed by an average of 1.8 bp, and with the bullishness into 10-year supply showing the need for some primary market accommodation, in the event we see an extension of the rally into Thursday’s offering, it is certainly reasonable to look for a similar outcome. As was a risk with 10s, less robust Japanese demand also advocates for some greater caution around supply despite the February 30-year auction showing the largest allocation to overseas investors at a refunding since 2011. 30-year yields were above 3.30% as recently as Monday, and the price action since then points to some supply discount being required for the final auction of the week.
… and for some MORE of the news you can use » IGMs Press Picks for today (12 May) to help weed thru the noise (some of which can be found over here at Finviz).
To the inbox, batman … First up some CHARTS for those looking to plan their trades and TRADE their plans.
KIMBLE on stocks S&P 500 Reversal Comes At Important Fibonacci Resistance!
1stBOS on FI — stay tactically BEARISH 10s while noting unsuccessful attempt to be short 5s and looking to get short 30s into further rally (sell AGAIN at resistance which they make out to be 2.965). Here’s daily visual of long bonds so as we can all attempt to play along at home,
From the professionals TO the self-proclaimed ALLSTARs,
ASC: Bonds Warn of Elevated Risks …
… If the grim reaper hasn’t come for the tickers in your portfolio, it’s most likely just a matter of time before he comes knocking.
Here’s a chart overlaying the S&P 500 $SPY and the HYG/IEI ratio:
… The largest companies in the world – $AAPL, $MSFT, $GOOGL, & $AMZN – are completing major tops. The median stock measured by the Value Line Geometric Index $VLG is undercutting its former 2018 highs. And we’re losing inflationary stocks and commodity-centric currencies as well.
We couldn’t say these things just a few weeks ago.
With risk appetite falling off a cliff as investors position for defense, we don’t want to fight these trends. Our best bet is to trade small, raise cash, and manage risk before all else…
They COULDN’T say those things before? I mean, technically they were not observed BUT to say or think that these unsayable developments were not thinkable, well … all I can say is that nothing the Fed (or the Government and its FISCAL IMPULSE) does is without consequence. Remind me again how much you pay for the AllStar ‘analysis’?
Sorry AllStars…not sorry.
Speaking of nothing without consequence, I’m not sure how Paul Donovan of UBS can say without a shadow of a doubt that,
Yesterday’s US consumer price inflation fell a little less than expected. Details confirmed stagflation is unlikely. Stagflation occurs when an item’s inflation increases at the same time as demand falls. Stagflation requires a specific and significant policy response. Yesterday’s data showed that where demand fell, inflation slowed or turned to deflation.
If demand is rising, prices are rising. US airfares roared ahead, reflecting an ongoing desire to travel. UK credit card data showed similar trends. Higher oil prices and the depletion of savings are causing demand destruction—but post-pandemic people are still desperate to take holidays. It is a reminder that the past is an unreliable guide to the present. We live in interesting times, not normal times.
Crypto prices continued to plunge – were crypto a currency (it is not), it would be hyperinflation. Bursting bubbles removes theoretical wealth from bubble buyers. Crypto wealth losses affect too few people to be economically significant, and sensible players will have regarded it as a speculative gamble not an investment.
US producer price inflation for April is due. The UK has another attempt at guessing first quarter GDP—this data is before the tax grab hit the economy. There are more ECB speakers, as markets focus on the prospects of a July rate increase.
It seems that the Fed and the administration are continuing to take steps to ENSURE this outcome … Fed slow-walking policy response (lets wait ‘til some random date to stop QT rather than doing what is necessary and when) while the fiscal authorities are continuing to spend with reckless abandon (hey, it is midterm season?). Releasing 12d of gas supply in the form of SPR, yeah, thanks that was great…
Enough with the ranting, already Ok, not ENTIRELY done.
One more story / link from WSJ to help reiterate the idea that NOTHING happens without consequence. This on CHINA from WSJ,
China’s Economic Slowdown Is Rippling All Around the World
For decades, the world has depended on China as a massive factory floor and market. Now, as the country’s economic growth crumbles, the pain is spreading globally.
Who knew. The Butterfly Effect 101?
… THAT is all for now. Off to the day job…