• Tag Archives Treasuries
  • US Futures Hit New All Time High Following Asian Shares Higher; European Stocks, Dollar Mixed

    U. S. equity index futures pointed to early gains and fresh record highs, following Asian markets higher, as European shares were mixed and oil was little changed, although it is unclear if anyone noticed with bitcoin stealing the spotlight, after futures of the cryptocurrency began trading on Cboe Global Markets.
    In early trading, European stocks struggled for traction, failing to capitalize on gains for their Asian counterparts after another record close in the U. S. on Friday. On Friday, the S&P 500 index gained 0.6% to a new record after the U. S. added more jobs than forecast in November and the unemployment rate held at an almost 17-year low. In Asia, the Nikkei 225 reclaimed a 26-year high as stocks in Tokyo closed higher although amid tepid volumes. Equities also gained in Hong Kong and China. Most European bonds rose and the euro climbed. Sterling slipped as some of the promises made to clinch a breakthrough Brexit deal last week started to fray.
    ‘Strong jobs U. S. data is giving investors reason to buy equities,’ said Jonathan Ravelas, chief market strategist at BDO Unibank Inc. ‘The better-than-expected jobs number supports the outlook that there is a synchronized global economic upturn led by the U. S.”
    The dollar drifted and Treasuries steadied as investor focus turned from US jobs to this week’s central bank meetings. Europe’s Stoxx 600 Index pared early gains as losses for telecom and utilities shares offset gains for miners and banks. Tech stocks were again pressured, with Dialog Semiconductor -4.1%, AMS -1.9%, and Temenos -1.7% all sliding. Volume on the Stoxx 600 was about 17% lower than 30-day average at this time of day, with trading especially thin in Germany and France.
    The dollar dipped 0.1 percent to 93.801 against a basket of major currencies, pulling away from a two-week high hit on Friday.

    This post was published at Zero Hedge on Dec 11, 2017.


  • Asian Market Rout Goes Global On Tech, Tax And Government Shutdown Tremors

    A selloff which started in Asia, driven by renewed liquidation of Chinese and Hong Kong tech stocks and accelerated by weaker metal prices which pushed the Shanghai Composite below a key support and to 4 month lows…

    … which sent the Nikkei to its worst day since March and the second worst day of the year, while the overall Asia Pac equity index slumped for the 8th day – the longest streak for two years, spread to Europe adn the rest of the world, pushing the MSCI world index lower by 0.3% as investors continued to lock in year-end gains among the best performing assets amid a broad risk-off mood. In FX, the dollar stabilized as emerging-market currency weakness meets yen gains while Treasuries and euro-area bonds gain as focus now turns to efforts to avert a U. S. government shutdown on Saturday. Euro and sterling trade heavy in average volumes while the loonie consolidates before BOC decision.

    This post was published at Zero Hedge on Dec 6, 2017.


  • Rig For Stormy Weather

    What storm? The Dow Jones Industrial Average (DOW) reached another all-time high. Interest rates in the U. S. are yielding multi-decade lows, some say multi-century lows. Trillions of dollars in global sovereign debt have negative yield and European junk bonds yield less than 10 year U. S. treasuries. ‘Official’ unemployment is low. Borrowing is inexpensive. Things are good, so they say!
    I Doubt It!
    Do you believe the above is a fair and accurate representation of our economic world? If so, how do you explain the following?
    Global debt exceeds $200 trillion and is rising rapidly. This massive debt will NOT be paid back in currencies with 2017 purchasing power. Debt MUST be rolled over in continually DEVALUING dollars, euros, yen and pounds. The financial system rolls over maturing debt, adds more, and pretends repayment will not be problematic. Those who hope this will remain true ignore the lessons of history, including sky-high interest rates in the late 1970s, the Asian and Long Term Capital crises in the late 1990s, many defaults and hyperinflations in the last century and the credit-crunch-recession-market-crash of 2008.

    This post was published at Deviant Investor on Dec 4, 2017.


  • UK’s Top Fund Manager: “So Many Lights Flashing Red, I’m Losing Count”

    Neil Woodford is the founder of Woodford Investment Management, with $20 billion under management, and was appointed a Commander of the Order of the British Empire (CBE) for services to the economy in the Queen’s 2013 Birthday Honours List. However, he’s not very happy in his latest outlook for equity markets, nor is he happy with the recent performance of his funds, although he’s been in this situation before – ahead of the tech crash in 2000 and the sub-prime crisis in 2008. According to the Financial Times.
    Neil Woodford, the UK’s most high-profile fund manager, has said he believes stock markets around the world are in a ‘bubble’ which when it bursts could prove ‘even bigger and more dangerous’ than some of the worst market crashes in history. The founder of Woodford Investment Management, which manages 15bn of assets, warned investors to be wary of ‘extreme and unsustainable valuations’ in an interview with the Financial Times, likening the level of risk to the dotcom bubble of the early 2000s. ‘Ten years on from the global financial crisis, we are witnessing the product of the biggest monetary policy experiment in history,’ he said. ‘Investors have forgotten about risk and this is playing out in inflated asset prices and inflated valuations. ‘Whether it’s bitcoin going through $10,000, European junk bonds yielding less than US Treasuries, historic low levels of volatility or triple-leveraged exchange traded funds attracting gigantic inflows – there are so many lights flashing red that I am losing count.’ Woodford likes to be contrarian: few people believed that Brexit was a buying opportunity, for example. Given his value investing style, it’s not surprising that’s he’s avoiding high-profile momentum driven names and boosting holdings in old economy ‘bricks and mortar’ companies, literally. The FT continues.

    This post was published at Zero Hedge on Dec 1, 2017.


  • 29/11/17: Four Omens of an Incoming Markets Blowout

    Forget Bitcoin (for a second) and look at the real markets.
    Per Goldman Sachs research, current markets valuation for bonds and stocks are out of touch with historical bubbles reality: As it says on the tin,
    ‘A portfolio of 60 percent S&P 500 Index stocks and 40 percent 10-year U. S. Treasuries generated a 7.1 percent inflation-adjusted return since 1985, Goldman calculated — compared with 4.8 percent over the last century. The tech-bubble implosion and global financial crisis were the two taints to the record.’
    Check point 1.
    Now, Check point 2: The markets are already in a complacency stage: ‘The exceptionally low volatility found in the stock market — with the VIX index near the record low it reached in September — could continue. History has featured periods when low volatility lasted more than three years. The current one began in mid-2016.’

    This post was published at True Economics on Nov 29, 2017.


  • The Flattening Yield Curve Is Not a Threat to US Equities

    Summary: On its own, a flattening yield curve is not an imminent threat to US equities. Under similar circumstances over the past 40 years, the S&P has continued to rise and a recession has been a year or more in the future. Investors should expect the yield curve to flatten further in the months ahead.
    Investors are concerned about the flattening yield curve. Enlarge any image by clicking on it.
    The yield curve measures the gap between long and short-term treasuries. The curve “flattens” when either short-term rates rise faster than long-term rates, or when long-term rates fall faster than short-term rates. The standard interpretation is that a flattening curve means that the bond market is pessimistic about future growth (low long rates) while the Federal Reserve is overly worried about inflation (rising short rates). The bond market’s view is typically more relevant.
    Our monthly macro updates (here) start with the latest yield curve, with the note that the yield curve has ‘inverted’ a year ahead of every recession in the past 40 years (arrows). With the yield curve still 60 basis points away from inversion, the current expansion will probably last well into 2018, at a minimum. In short, the risk of an imminent recession is low.

    This post was published at FinancialSense on 11/27/2017.


  • Biggest Bubble Ever? 2017 Recapped In 15 Bullet Points

    Yesterday we presented readers with one of the most pessimistic, if not outright apocalyptic, 2018 year previews, courtesy of BofA’s chief investment, Michael Hartnett who warned that in addition to the bursting of the bond bubble in the first half of the year, the stock market could see a 1987-like flash crash, potentially followed by a sharp spike in (violent) social conflict. However, in addition to his forecast, Hartnett also had one of the more informative, and descriptive, reviews of the year that was, or as he put it: 2017 was the perfect encapsulation of an 8-year QE-led bull market.
    Here are his 15 bullet points that show why in 2017 we may have seen the biggest bubble ever (and why we can’t wait to see what 2018 reveals).
    Da Vinci’s ‘Salvator Mundi’ sold for staggering record $450mn Bitcoin soared 677% from $952 to $7890 BoJ and ECB were bull catalysts, buying $2.0tn of financial assets Number of global interest rate cuts since Lehman hit: 702 Global debt rose to a record $226tn, record 324% of global GDP US corporates issued record $1.75tn of bonds Yield of European HY bonds fell below yield of US Treasuries Argentina (8 debt defaults in past 200 years) issued 100-year bond Global stock market cap jumped1 $15.5tn to $85.6tn, record 113% of GDP S&P500 volatility sank to 50-year low; US Treasury volatility to 30-year low Market cap of FAANG+BAT grew $1.5tn, more than entire German market cap 7855 ETFs accounted for 70% of global daily equity volume The first AI/robot-managed ETF was launched (it’s underperforming) Big performance winners: ACWI, EM equities, China, Tech, European HY, euro Big performance losers: US$, Russia, Telecoms, UST 2-year, Turkish lira

    This post was published at Zero Hedge on Nov 22, 2017.


  • Bill Blain: “Stock Markets Don’t Matter; The Great Crash Of 2018 Will Start In The Bond Market”

    Blain’s Morning Porridge, Submitted by Bill Blain of Mint Partners
    The Great Crash of 2018? Look to the bond markets to trigger Mayhem!
    I had the impression the markets had pretty much battened down for rest of 2017 – keen to protect this year’s gains. Wrong again. It seems there is another up-step. After the People’s Bank of China dropped $47 bln of money into its financial system (where bond yields have risen dramatically amid growing signs of wobble), the game’s afoot once more. The result is global stocks bound upwards. Again. It suggest Central Banks have little to worry about in 2018 – if markets get fraxious, just bung a load of money at them.
    Personally, I’m not convinced how the tau of monetary market distortion is a good thing? Markets have become like Pavlov’s dog: ring the easy money bell, and markets salivate to the upside.
    Of course, stock markets don’t matter.
    The truth is in bond markets. And that’s where I’m looking for the dam to break. The great crash of 2018 is going to start in the deeper, darker depths of the Credit Market.
    I’ve already expressed my doubts about the long-term stability of certain sectors – like how covenants have been compromised in high-yield even as spreads have compressed to record tights over Treasuries, about busted European regions trying to pass themselves off as Sovereign States (no I don’t mean the Catalans, I mean Italy!), and how the bond market became increasingly less discerning on risk in its insatiable hunt for yield. Chuck all of these in a mixing bowl and the result is a massive Kerrang as the gears of finance explode!

    This post was published at Zero Hedge on Nov 17, 2017.


  • Goldman Reveals Its Top Trade Recommendations For 2018

    It’s that time of the year again when with just a few weeks left in the year, Goldman unveils its top trade recommendations for the year ahead. And while Goldman’s Top trades for 2016 was an abysmal disaster, with the bank getting stopped out with a loss on virtually all trade recos within weeks after the infamous China crash in early 2016, its 2017 “top trade” recos did far better. Which brings us to Thursday morning, when Goldman just unveiled the first seven of its recommended Top Trades for 2018 which “represent some of the highest conviction market expressions of our economic outlook.”
    Without further ado, here are the initial 7 trades (on which Goldman :
    Top Trade #1: Position for more Fed hikes and a rebuild of term premium by shorting 10-year US Treasuries. Top Trade #2: Go long EUR/JPY for continued rotation around a flat Dollar. Top Trade #3: Go long the EM growth cycle via the MSCI EM stock market index. Top Trade #4: Go long inflation risk premium in the Euro area via EUR 5-year 5-year forward inflation. Top Trade #5: Position for ‘early vs. late’ cycle in EM vs the US by going long the EMBI Global Index against short the US High Yield iBoxx Index. Top Trade #6: Own diversifed Asian growth, and the hedge interest rate risk via FX relative value (Long INR, IDR, KRW vs. short SGD and JPY). Top Trade #7: Go long the global growth and non-oil commodity beta through long BRL, CLP, PEN vs. short USD.

    This post was published at Zero Hedge on Nov 16, 2017.


  • Broke And Desperate, Part 1: Chicago Pawns A Crown Jewel

    A new bond issue from Chicago is rated AAA. That’s great because it means the city’s finances are on the mend, right?
    Nope, just the opposite. Here’s the story:
    Bondholders fret as alchemy turns Chicago’s junk to gold
    (Bloomberg) – Chicago’s public pension debt is $36 billion and growing, it’s facing $550 million in budget deficits over the next three years and this summer the state had to bail out a school system that was flirting with insolvency.
    Yet next month, the nation’s third-largest city – whose bonds were downgraded to junk by Moody’s Investors Service two years ago – will start selling as much as $3 billion of debt that another rating company considers as safe as U. S. Treasuries.
    That’s because Chicago is selling off its right to receive sales-tax revenue from Illinois to a separate public corporation, which will issue new bonds backed by those funds, a structure called securitization. Because bondholders will be insulated from the city’s finances and have a legal claim to the sales-tax money, Fitch Ratings deems the bonds AAA.

    This post was published at DollarCollapse on NOVEMBER 13, 2017.


  • 7/11/17: 800 years of bond markets cycles

    An interesting new working Paper from the BofE, titled ‘Eight centuries of the risk-free rate: bond market reversals from the Venetians to the ‘VaR shock” (Bank of England, Staff Working Paper No. 686, October 2017) by Paul Schmelzing looks at new data for ‘the annual risk-free rate in both nominal nd real terms going back to the 13th century.’
    Such a long horizon allows the author to establish and define the existence of the long term ‘bond bull market’
    Specifically, the author shows ‘that the global risk-free rate in July 2016 reached its lowest nominal level ever recorded. The current bond bull market in US Treasuries which originated in 1981 is currently the third longest on record, and the second most intense.’

    This post was published at True Economics on Tuesday, November 7, 2017.


  • We’ll Look Back At This And Cringe, Part 1: European Junk Bonds Yield Less Than US Treasuries

    Financial bubbles are the office Christmas parties of the investment world. They start slowly, with a certain amount of anxiety. But they end wildly, with acts and decisions that in retrospect seem really, really stupid.
    Millions of people out there still bear the psychic scars of buying gold at $800/oz in 1980 or a tech stock at 1,000 times earnings in 1999 or a Miami condo for $1,000 per square foot in 2006.
    Today’s bubble will leave some similar marks. But where those previous bubbles were narrowly focused on a single asset class, this one is so broad-based that the hangover is likely to be epic in both scope and cumulative embarrassment.
    This series will create a paper trail for the morning after, starting with a truly amazing anomaly: European junk bonds now yield less than US Treasury bonds.

    This post was published at DollarCollapse on NOVEMBER 5, 2017.


  • Treasurys Gain, Curve Flattens After Refunding Auction Sizes Remain Unchanged

    When previewing today’s FOMC announcement, we said that at least according to some, this morning’s refunding announcement may have a bigger impact on the market as there is less consensus (and more confusion) about what would be unveiled. As JPM analyst Jay Barry told Bloomberg, the quarterly refunding announcement at 8:30am ET Wednesday ‘has the possibility to be a bigger event for markets in the morning than the Fed statement in the afternoon’ as participants are divided on whether the Treasury will announce increases to coupon auction sizes Wednesday, or wait until the 1Q refunding announcement in February:
    ‘There’s a dispersion of views because of the pivot the Treasury Department has had over last few years,’ specifically toward portfolio metrics and aiming to extend the weighted average maturity of the portfolio. Merely reversing the cuts that have been made to 2Y and 3Y auctions since 2013 wouldn’t serve that objective. ‘If they don’t get announced tomorrow, it’s a muted rally, and if they do, it’s a muted steepening.’
    Furthermore, as Bloomberg summarizes, going into today’s announcement, market participants were divided leading into the announcement with most seeing no increase immediately to auction sizes just yet, seeing only bill auction changes for now: Barclays, NatWest, Bank of America, Credit Agricole, Jefferies, Stone & McCarthy Research Associates and Citigroup all saw no change; JPMorgan Chase, among other, looked for small increases across maturities.
    Well, moments ago the US Treasury reported the breakdown of the refunding auctions, which led to Treasuries promptly paring some early losses (and leading to the predicted muted curve flattening) after the Treasury Department maintained its coupon auction sizes over the next three months, while the refunding statement did not comment on ultra-long issuance.

    This post was published at Zero Hedge on Nov 1, 2017.


  • Market Talk- October 31, 2017

    A slow but steady day in Asian equity markets, but happy in the knowledge that the BOJ left almost everything unchanged. The Nikkei closed almost unchanged but has set an impressive two month rally. At above 22k the index closes at a 21 year high, but after the weak opening it took all day to recover unchanged. The Yen was a little weaker (0.5%) as it challenges the 114 handle again. The Australian ASX did open better but drifted throughout the day eventually closing on its low. However, irrespective of todays price action it has been a constructive month for the All Ords with a gain of around 3%. Shanghai managed to shake-off the PMI miss (51.6 against market expectations of 52), with Services also declining. In Hong Kong the Hang Seng we closed down -0.3% with bank stocks weighing on the market.
    Although we finished the month on a positive note, volumes were low. This usually is the case when a large index is closed and with Germany on a national holiday the absence of the DAX was noticeable. Spain’s IBEX helped sentiment though with a daily gain of +0.7%. The market is valuing ‘no news’ as positive these days, so with the demand for yield ever present any quiet day is good for low grade paper. This is present when comparing global credits to the states where it is not uncommon to find BBB credits trading even yield with US treasuries. The CAC managed a small +0.2% gain whilst the largest bank (BNP Paribas) recorded as the worst performing European bank stock today (-2.7%). UK’s FTSE managed a small positive for the day but an +0.5% in the currency helped international investors as traders continue to price in a BOE move on Thursday. Talk is that BREXIT discussions may be progressing better than many had expected but we have yet to hear details.

    This post was published at Armstrong Economics on Oct 31, 2017.


  • Oil For Gold – Real Or Imagined?

    By having control of the physical market for gold, China can threaten to use it to destabilize the dollar, without destabilizing the yuan. As such, it is potentially devastating, and used carelessly could trigger an economic collapse in Western capital markets, wreaking financial and economic havoc in America and other advanced nations. China will never be wholly independent from trade with these nations, and severe financial and economic damage to the advanced economies will rebound upon her to some extent. For this reason, she has so far held off using gold as an economic and financial weapon, while she continues to insulate herself from periodic crises in Western economies. – Alasdair Macleod (Oil For Gold)
    In response to questions about when China would finally cast aside the dollar and run the price of gold up, I’ve always replied that China would be shooting itself in the foot if it tried to replace the dollar too quickly. Don’t forget, China holds about $1.2 trillion in the form of Treasuries. Note: this ratio does not include the market value of its gold holdings, the actual amount of which is unknown outside of a small circle of Chinese officials.
    When the idea of a gold-backed yuan-denominated oil futures contract surfaced, it became en vogue for those unable to analyze their way out of a paper bag to issue commentary refuting the idea. For some, if an event has not already occurred, they are unable to ‘see’ it.

    This post was published at Investment Research Dynamics on October 29, 2017.


  • GE-Dip-Buying-Panic Sends Dow To ‘Most Overbought’ In 62 Years, Yield Curve Collapse Continues

    Always…
    As Bloomberg summarizes, the dollar rose, Treasuries sank and all three broad stock indexes are heading for a record close on bets a budget compromise will bring Washington closer to agreeing on Trump’s promise of tax reform. The dollar touched a three-month high and 10-year Treasury yields approached 2.4% while the Canadian dollar tumbled after inflation and retail sales missed estimates. Some clarity on a budget resolution, a good quarter of earnings and the anticipation of an announcement of the next Fed chair has led to market confidence. One stock clearly bucked the earnings trend; GE posted results before the bell, missing analysts’ estimates significantly and slashing its profit forecast. The stock erased losses after falling 7% in premarket trading.
    So – GE did this…

    This post was published at Zero Hedge on Oct 20, 2017.


  • TIPS Auction Points to Inflation Below Fed Target for Decades

    (Bloomberg) – As traders prepare to underwrite $5 billion of inflation-linked Treasuries on Thursday, they’re as confident as ever that the Federal Reserve’s predicted inflation rebound won’t materialize at any point in the next 30 years.
    Low inflation, which Fed Chair Janet Yellen last weekend called ‘the biggest surprise in the U. S. economy this year,’ has been a fact of life for years in the $1.29 trillion market for Treasury Inflation Protected Securities. The market-implied inflation expectation signaled by five-year TIPS has rarely been above the 2 percent mark since 2013.

    This post was published at Wall Street Examiner on October 19, 2017.


  • The Death Of Petrodollars & The Coming Renaissance Of Macro Investing

    The petrodollar system is being undermined by exponential growth in technology and shifting geopolitics. What comes next is a paradigm shift…
    ***
    In the summer of 1974, Treasury Secretary William Simon traveled to Saudi Arabia and secretly struck a momentous deal with the kingdom. The U. S. agreed to purchase oil from Saudi Arabia, provide weapons, and in essence guarantee the preservation of Saudi oil wells, the monarchy, and the sovereignty of the kingdom. In return, the kingdom agreed to invest the dollar proceeds of its oil sales in U. S. Treasuries, basically financing America’s future federal expenditures.
    Soon, other members of the Organization of Petroleum Exporting Countries followed suit, and the U. S. dollar became the standard by which oil was to be traded internationally. For Saudi Arabia, the deal made perfect sense, not only by protecting the regime but also by providing a safe, liquid market in which to invest its enormous oil-sale proceeds, known as petrodollars. The U. S. benefited, as well, by neutralizing oil as an economic weapon. The agreement enabled the U. S. to print dollars with little adverse effect on interest rates, thereby facilitating consistent U. S. economic growth over the subsequent decades.

    This post was published at Zero Hedge on Oct 14, 2017.


  • Doug Noland: Arms Race

    This is a syndicated repost courtesy of Credit Bubble Bulletin . To view original, click here. Reposted with permission.
    Bloomberg: ‘Treasuries Surge as December Hike Odds Drop After CPI Miss.’ Year-over-year CPI was up 2.2% in September, with consumer inflation above 2% y-o-y for six of the past 10 months. The Producer Price Index gained 2.6% y-o-y in September. Yet, apparently, the focus will remain on core CPI (along with core personal consumption expenditure inflation) that, up 1.7% y-o-y, missed estimates by one tenth and remained below 2% for the sixth straight month. Notably – analytically if not in the markets – the preliminary October reading of University of Michigan Consumer Confidence jumped six points to the high since January 2004. Or taking a slightly different view, Consumer Confidence has been stronger for only one month in the past 17 years. Current Conditions rose to the highest level since November 2000.
    Data notwithstanding, from Bloomberg: ‘Bond Shorts Experience the Agony of Defeat Yet Again.’ Ten-year Treasury yields declined nine bps this week to 2.27%, though I’m not sure this qualifies as a ‘defeat.’ In stark contrast to the fanatical gathering on the opposing side of the field, not a single central banker was spotted on the bond bears’ sideline.

    This post was published at Wall Street Examiner by Doug Noland ‘ October 14, 2017.