Posts Tagged ‘2/10 yield curve’

Notes From Underground: Some Perspective on Wednesday’s FOMC Meeting

June 13, 2017

The FED has painted itself into the proverbial corner by pre-announcing a rate hike. The market will be listening to Chair Janet Yellen’s press conference, which takes place at 1:30 CDT, a half hour after the Fed releases its statement and summary of economic projections. The market is expecting some discussion Fed’s balance sheet unwind, but Yellen will be cautious as she won’t want to cause a large selloff in the Treasuries led by the algo-driven headline readers. Tomorrow morning the Bureau of Labor Statistics releases the CPI data, alongside the Census Bureau’s retail sales data. Market consensus is for tepid numbers on both releases.

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Notes From Underground: The Mnuchin Budget — 96 Tears With ? and The Mysterians

May 24, 2017

The rollout of the long-anticipated U.S. Treasury budget brought tears to my eyes. Why? Because it couldn’t help but wonder how supposedly intelligent people could present a politically ridiculous BUDGET and tax plan. The drafters lose the battle when they first present an increase in defense and make it a sacred cow of the Trump White House. You cut many social safety net programs while finding MONEY for questionable foreign entanglements and many unneeded weapons systems. The beauty of the original Bowles-Simpson plan was that all the sacred cows of the budget process were GORED. In my opinion real budget changes and reform must start with reining in the defense sector, but unfortunately too many Congressional districts are the recipients of defense spending and, of course, defense sector jobs. In a GREAT SANTELLI INTERVIEW Wednesday, former Senator Alan Simpson ripped apart the White House budget proposal and noted that it was sprinkled with fairy dust.

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Notes From Underground: He Goes Running For the Shelter of His Mother’s Little Helper

February 28, 2016

(Larry Summers had to run to his medicine cabinet to take Prozac (not Diazepam as in the Rolling Stones song) after he read the G-20 communique. The finance ministers and central bank heads meeting in Shanghai failed to come to terms with any of the issues concerning the global economy. There was no PLAZA ACCORD and no  deep discussions about the need for massive fiscal stimulus. The tone of the Communique was TEPID at best and views the present state of the global economy as slow but steady. There was certainly NO URGENCY about a rise in the prospects of a global recession. The finance ministers downplayed the recent volatility and slide in global equity markets, suggesting by those domiciled in ivory towers and model-based rat holes that the MARKETS ARE MISTAKEN AND THE MODELS ARE CORRECT. The arguments among the participants was such that there were some issues that seem in direct contradiction of any policy response.

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Notes From Underground: “It Was the Best of Times. It Was the Worst of Times”

December 28, 2014

As 2014 draws to a close, the financial landscape is definitely a tale of two disparate economies as the U.S. reports 5 percent GDP while Europe struggles to maintain zero growth and avoid “recession.” (I despise the official definition of a recession being two consecutive quarters of negative growth.) In Spain, Italy, Greece Portugal, France and other countries, double-digit unemployment defines a recession and the potential it brings for political turmoil.

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Notes From Underground: The Unemployment Report Table Is Set, Will You Be On The Menu?

July 2, 2014

Today’s release of the ADP report caused the market to react in highly predictable fashion. ADP data predicts a nonfarm payroll in the high 200,000 and as to be expected the BOND FUTURES were sold on the positive outlook, resulting in a STEEPENING in the 2/10 yield curve, a rally in the U.S. DOLLAR and leaving yesterday’s SPOOS rally intact. The only non-correlative trade was the precious metals and copper as both sets of ELEMENTS rallied, defying the implications of potential higher interest rates. Tomorrow will be important in seeing how the market reacts to the jobs data. BE PATIENT. Here’s why:

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Notes From Underground: A Slow Weekend News Cycle

May 18, 2014

In a weekend of very little financial news the biggest story becomes the announcement by Deutsche Bank that its plans to raise 8 BILLION EUROS ($11 BILLION) in new capital to shore up its balance sheet. (Deutsche Bank closed near its 50-week on Friday at $42.17.) I have had many calls and e-mails about the impact from this news. My response to all has been to wait to see how Deutsche Bank trades tomorrow to see if this is a buy the fact opportunity. It is no secret that DB is the most highly leveraged of all the major global banks so a capital infusion is not a surprise event as Europe undergoes ECB-mandated stress tests. The bottom line is that the DB news will have little impact upon the EURO currency or the BUND market. If Deutsche Bank had failed the upcoming stress tests that would’ve been a major news event. Eight billion euros to shore up its balance sheet is a mere ounce of prevention.

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Notes From Underground: Has the Fed Potentially Created a Trap For Itself??? (Maybe)

May 13, 2014

As the talk turns to concern about inflation in the U.S. and possibly the U.K., we must ask ourselves a question that will be our focus for at least the next six months.

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Notes From Underground: Making Sense From the U.S. Dollar Post-Payrolls

May 4, 2014

The U.S. unemployment data released on Friday was extremely positive on two measures: Nonfarm payrolls increased by 288,000 and the unemployment rate dropped from 6.7 to 6.3 percent. The soft side of the numbers was that the average hours worked remained flat and the all-important average hourly earnings also stayed flat, undermining the robustness of the headline figure. The U.S. dollar and U.S. bond markets initially performed as expected as the DOLLAR strengthened and bond yields rose in response to positive news. However, by day’s end the DOLLAR was LOWER and the yields on the long end of the CURVE had also dropped while the SPOOS and DOW failed to hold gains on what was a very strong employment picture. The reason given by analysts was that the Ukraine situation was becoming more volatile and caused investors to be cautious over the weekend.

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Notes From Underground: What Is All The Yellen About?!?!?

March 24, 2014

The financial markets have been pondering the effects of Chair Yellen’s March 19 press conference and trying to discern what the true meaning of the “six month” import of rate rises beginning at the end of the tapering process that the Fed has initiated. The move in the short-end of the yield curve has revealed what I have long thought: The middle part of the yield curve has been badly mispriced as many hedge funds and fixed income buyers have comfortably bought more term instruments in the shadow of the Fed’s massive buying program. Venturing into the valley of the three- to five-year duration has not been the “safe harbor” that many thought and the result has been a post Fed meeting massive move in the 5/30 part of the yield curve.

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Notes From Underground: Why Is This CASH S&P HIGH DIFFERENT FROM THE PREVIOUS HIGH?

March 31, 2013

I make a distinct reference to the CASH HIGH S&Ps versus the S&P FUTURES has made an all-time high. According to the CQG charts, the all-time high in the S&P futures front month is 1586.75 and the high daily close is 1576.25. The CASH high is 1576.09 and the previous high CASH daily close was 1565.15, which was surpassed on Friday’s close. Here is a significant chart that shows the important difference between Friday’s close and the last record high close of October 9, 2007.

 

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