Tag Archive: Bonds

What Tokyo Eurodollar Redistribution Really Means For ‘Green Shoots’

2019-05-02

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2019-05-02

TIC - US Banking Data
Last April, monetary officials in Japan were publicly contemplating ending asset purchases under QQE. This April, they are more quietly wondering what other financial assets they might have to buy just to keep it all going a little longer. I’d suggest something like the clouds passing over the islands or the ocean water surrounding them. Nobody would notice either way and it would be equally as effective.

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COT Blue: Distinct Lack of Green But A Lot That’s Gold

2019-04-24

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2019-04-24

US Shortage, Gold, 2017-2019
Gold, in my worldview, can be a “heads I win, tails you lose” proposition. If it goes up, that’s fear. Nothing good. If it goes down, that’s collateral. In many ways, worse. Either way, it is only bad, right? Not always. There are times when rising gold signals inflation, more properly reflation perceptions. Determining which is which is the real challenge.

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Retail Sales In Bad Company, Decouple from Decoupling

2019-04-04

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2019-04-04

Retail Sales, NSA 2011-2018
In a way, the government shutdown couldn’t have come at a more opportune moment. As workers all throughout the sprawling bureaucracy were furloughed, markets had run into chaos. Even the seemingly invincible stock market was pummeled, a technical bear market emerged on Wall Street as people began to really consider increasingly loud economic risks.

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Phugoid Dollar Funding

2019-04-04

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2019-04-04

Money Markets Equivalents 2014-2019
On August 12, 1985, Japan Airways flight 123 left Tokyo’s Haneda Airport on its way to a scheduled arrival in Osaka. Twelve minutes into the flight, the aircraft, a Boeing 747, suffered catastrophic failure when an aft pressure bulkhead burst.

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Monthly Macro Monitor: Well Worried

2019-03-28

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2019-03-28

Yield Curve and Lending Standards 1990-2018
Don’t waste your time worrying about things that are well worried. Well worried. One of the best turns of phrase I’ve ever heard in this business that has more than its fair share of adages and idioms. It is also one of the first – and best – lessons I learned from my original mentor in this business. The things you see in the headlines, the things everyone is already worried about, aren’t usually worth fretting over.

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The Real End of the Bond Market

2019-03-22

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2019-03-22

US Treasury Yield Curve
These things are actually quite related, though I understand how it might not appear to be that way at first. As noted earlier today, the Fed (yet again) proves it has no idea how global money markets work. They can’t even get federal funds right after two technical adjustments to IOER (the joke).

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Chart(s) of the Week: Reviewing Curve Warnings

2019-03-19

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2019-03-19

Eurodollar Futures Curve 2018
Quick review: stocks hit a bit of a rough patch right during the height of inflation hysteria. At the end of January 2018, just as the US unemployment rate had finally achieved the very center of attention, global markets were rocked by instability. Unexpectedly, of course.

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Not Buying The New Stimulus

2019-03-08

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2019-03-08

ECB GDP Projections, March 2016 - 2019
What just happened in Europe? The short answer is T-LTRO. The ECB is getting back to being “accommodative” again. This isn’t what was supposed to be happening at this point in time. Quite the contrary, Europe’s central bank had been expecting to end all its programs and begin normalizing interest rates.

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No Surprise, Hysteria Wasn’t a Sound Basis For Interpretation

2019-02-28

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2019-02-28

Labor Utilization Total Hours Worked 2008-2018
What gets them into trouble is how they just can’t help themselves. Go back one year, to early 2018. Last February it was all-but-assured (in mainstream coverage) that the US economy was going to take off. The bond market, meaning UST’s, was about to be massacred because the overheating boom would force a double shot down its throat.

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Sinking Shippers Signal Global Goods Troubles

2019-02-24

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2019-02-24

US Treasury Yields 2007-2019
It infects every boardroom across the world. Big business requires decent forecasting, yet time and again it seems they are deprived of what they desperately need. Instead, even after this last decade, the world’s largest companies continue to be surprised by weakness that is far more prevalent than strength.

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FOMC Minutes: The New Narrative Takes Shape

2019-02-22

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2019-02-22

Money Markets Equivalents 2009-2018
Nothing the Fed did today, or has done up to today, has changed the curves. Eurodollar futures and UST’s, they are both still inverted. The former sharply inverted. The only thing that has changed since early January is the narrative – and not in a charitable way. It is treated as a positive when it is a pretty visible signal about deteriorating circumstances.

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Inflation Falls Again, Dot-com-like

2019-02-16

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2019-02-16

CPI Changes On Energy 2016-2019
US inflation in January 2019 was, according to the CPI, the lowest in years. At just 1.55% year-over-year, the index hadn’t suggested this level since September 2016 right at the outset of what would become Reflation #3. Having hyped expectations over that interim, US policymakers now have to face the repercussions of unwinding the hysteria.

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More Of What Was Behind December, And Not Just December

2019-02-09

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2019-02-09

Rational Expectations
As more and more data rolls in even in this delayed fashion, the more what happened to end last year makes sense. The Census Bureau updated today its statistics for US trade in November 2018. Heading into the crucial month of December, these new figures suggest a big setback in the global economy that is almost certainly the reason markets became so chaotic.

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Lost In Translation

2019-02-08

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2019-02-08

Japan - JGB's 2016-2019
Since I don’t speak Japanese, I’m left to wonder if there is an intent to embellish the translation. Whoever is responsible for writing in English what is written by the Bank of Japan in Japanese, they are at times surely seeking out attention. However its monetary policy may be described in the original language, for us it has become so very clownish.

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LIBOR Was Expected To Drop. It Dropped. What Might This Mean?

2019-02-08

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2019-02-08

Money Markets Equivalents 2007
Everyone hates LIBOR, until it does something interesting. It used to be the most boring interest rate in the world. When it was that, it was also the most important. Though it followed along federal funds this was only because of the arb between onshore (NYC) and offshore (mainly London, sometimes Caymans) conducted by banks between themselves and their subs (whichever was located where).

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Fear Or Reflation Gold?

2019-02-04

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2019-02-04

Dollar Correlations 2016-2019
Gold is on fire, but why is it on fire? When the precious metals’ price falls, Stage 2, we have a pretty good idea what that means (collateral). But when it goes the other way, reflation or fear of deflation? Stage 1 or Stage 3? If it is Stage 1 reflation based on something like the Fed’s turnaround, then we would expect to find US$ markets trading in exactly the same way.

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Bond Curves Right All Along, But It Won’t Matter (Yet)

2019-02-03

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2019-02-03

Real GDP in the Eurodollar Era 1993-2017
Men have long dreamed of optimal outcomes. There has to be a better way, a person will say every generation. Freedom is far too messy and unpredictable. Everybody hates the fat tails, unless and until they realize it is outlier outcomes that actually mark progress. The idea was born in the eighties that Economics had become sufficiently advanced that the business cycle was no longer a valid assumption.

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Monthly Macro Monitor – January 2019

2019-01-27

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2019-01-27

Economic Growth & Investment
A Return To Normalcy. In the first two years after a newly elected President takes office he enacts a major tax cut that primarily benefits the wealthy and significantly raises tariffs on imports. His foreign policy is erratic but generally pulls the country back from foreign commitments. He also works to reduce immigration and roll back regulations enacted by his predecessor.

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Hall of Mirrors, Where’d The Labor Shortage Go?

2019-01-20

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2019-01-20

Federal Reserve Beige Book 2010-2019
Today was supposed to see the release of the Census Bureau’s retail trade report, a key data set pertaining to the (alarming) state of American consumers, therefore workers by extension (income). With the federal government in partial shutdown, those numbers will be delayed until further notice. In their place we will have to manage with something like the Federal Reserves’ Beige Book.

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Spreading Sour Not Soar

2019-01-18

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2019-01-18

Sweden / Japan
We are starting to get a better sense of what happened to turn everything so drastically in December. Not that we hadn’t suspected while it was all taking place, but more and more in January the economic data for the last couple months of 2018 backs up the market action. These were no speculators looking to break Jay Powell, probing for weakness in Mario Draghi’s resolve.

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