while we slept; UNLIMITED; "Prepare for a hard landing"; from transitory TO this from Liberty St
Good morning…
Unlimited: not limited or restricted in terms of number, quantity, or extent. "the range of possible adaptations was unlimited"
RTRS: Bank of Japan boosts defense of yield target, offers to buy debt for four days. The Bank of Japan on Wednesday boosted efforts to defend its yield target, making a fresh offer to buy an unlimited amount of the 10-year bonds for four consecutive sessions…
Goldilocks note,
BOJ Offers Fixed-Rate Operation to Defend YCC Again
At 10.10am JST on April 20, the Bank of Japan (BOJ) announced that it would conduct a fixed-rate operation at a yield of 0.25% for 10-year JGBs (starting on April 21) in a response to the 10-year JGB yield rising to 0.25% just prior to this announcement (Exhibits 1, 2). BOJ Governor Haruhiko Kuroda has repeatedly said that he sees no need to make adjustments to yield curve control (YCC), because even though the CPI inflation rate is increasingly likely to reach 2% sometime this year, sustainability is low. Therefore, the latest fixed-rate operation was no surprise to us.
Meanwhile, we’re still waiting on HIMCOs latest quarterly to drop and some reasonable explanation of whether or not THE end (of an era) is near and of some sorta game plan and so …
Got 20s? Tune in this afternoon for the 1pm LIQUIDITY EVENT (aka 20yr auction) where one large German shop notes a couple bullet points
Twenty-year bond yields have risen ~52bp since the last auction stop-out level and are currently trading at about 3.17%.
End-user demand increased to a record 90.4% in March, as the direct bidders participation rose to an all-time-high of 26.0%. Indirect participation also improved to 64.4% from 62.9% in the previous month…
… here is a snapshot OF USTs as of 701a:
… HERE is what another shop says be behind the price action overnight … in their morning commentary, 10-year Reals Test Positive, BMO notes
…Overnight Flows
Treasuries found a modest bid after initially selling off during the overnight session as 10s reached 2.977%. Overnight volumes were near the norms with cash trading at 102% of the 10-day moving-average. 5s were the most active issue, taking a 31% marketshare while 10s were second at 25%. 2s and 3s combined to take 30% at 16% and 14%, respectively. 7s managed 9%, 20s 1%, and 30s 4%. We’ve seen in 5s and two-way flows in the long end.
… and for some MORE of the news you can use » IGMs Press Picks for today (20 April) to help weed thru the noise (some of which can be found over here at Finviz).
Finally, a few items from Global Wall Streets Inbox … what some of the best in the biz (not all) are sayin and sellin:
1stBOS CHART of the Day:: 2yr US Real Yields are threatening a large “double bottom” base if the market can post a weekly closing break above the 23.6% retracement of the entire 2018/22 fall and February/April at -1.825/78%, which would turn the medium-term risks higher. Next supports are seen at 1.50%, then the relatively distant 38.2% retracement at -1.13%. It’s worth highlighting though that the potential “measured base objective” coincides almost exactly with the 50% retracement at -.54%, although this would very much be viewed as a medium-term objective if the base is confirmed.
The same firm is looking for 10yy to break above 3.00% next (and would turn tactically bearish @ 2.83) while noting long bonds now ‘well above secular downtrend supports reinforcing the move higher in global yields”.
With this bond bearishness in mind, very latest HOUSE VIEW from large German institution suggesting we all, Prepare for a hard landing and inside this note you’ll find
Seems to ME that the amount of bond bearishness built / building in the system has yet to catch up with stocks and, for that matter, housing and overall consumer. At some point something will simply have to give as Stephen Wright noted quite awhile ago …
With this (little) in mind, following from the folks at Liberty St Econ dept,
Inflation Persistence: How Much Is There and Where Is It Coming From?
… Concluding Comments
As the recent surge in inflation has endured, it has triggered a series of narrative shifts—price increases were initially deemed to be transitory, then they were tied to developments in specific sectors and changes in consumption patterns, and now inflation is acknowledged to be a broad-based phenomenon.In this post, we provide a model-based perspective on this narrative: large increases and decreases in monthly inflation during 2020 were largely the result of transitory shocks and outliers, with the trend component remaining relatively stable until early 2021, as common and sector-specific forces pulled in opposite directions. Sometime in the fall of 2021, the common persistent component came to dominate the evolution of the trend and today it stands as a significant driver of inflation. Sector-specific movements may have been relevant at the beginning of the pandemic but are currently playing a smaller role than common dynamics.
Of course, the preceding assessment uses all available data as of April 2022 and therefore has the benefit of hindsight. Even though the model captured early on the persistent nature of inflation movements, today’s interpretation is subject to much less uncertainty than what the model suggested in real time.
Still waiting for some sense and sensibility to be delivered in the form of latest quarterly report from HOISINGTON and so, in the meanwhile, THAT is all for now. Off to the day job…