30-year Treasury Auction Strong With $13 Billion Sold To Public (None Bought By The Fed)

By Anthony B. Sanders

[Yesterday’s] US Treasury 30-year bond auction was strong. $13 billion were sold to the public  and none purchased by The Fed for the first time since the December 12, 2017 auction.


So far, so good. Despite massive Federal spending and projected budget deficits, Treasury auctions are going well.

Continue reading 30-year Treasury Auction Strong With $13 Billion Sold To Public (None Bought By The Fed)

Desperately Seeking Larry (Kudlow)

By David Stockman

About midday yesterday we got to wondering just how desperate bubblevision is for fake good news to peddle because apparently even the talking heads can’t figure out why the market keeps levitating higher.

These ruminations arose after we had turned down a request to appear on the CNBC Halftime Report to comment on the network’s “breaking news” that Larry Kudlow was about to be named Trump’s top economic advisor. Next thing we knew, however, the show’s host, Scott Wapner, broke into the producer’s follow-up call, insisting we reconsider.

The apparent goal was to elicit some praise for Larry’s solid free trade position. And, obviously, Trump’s increasingly unhinged trade-war-in-the-making could indeed upset the Wall Street applecart.

Continue reading Desperately Seeking Larry (Kudlow)

The X’s and Y’s Of Jerome Powell & The Long End, As Calculated by Eurodollar Futures

By Jeffrey Snider

For the end-of-bond-bull-market-crowd, 3% is a line in the sand. There is no inherent significance in that number, except that it’s a round one. The benchmark 10s as of now trade with regard to that level as if it’s a ceiling. That’s what makes it so momentous. In 2013, the yield finally broke 3% the day after Christmas, getting as high as 3.04% on New Year’s Eve. It hung around there until January 8, 2014, before finally declining back below 3% and remaining less to this day.

Back in 2010, though, 3% was meaningless. At that time, the level to beat was 4%, which the 10s did exactly once that year on April 5. The difference between 2010 and 2013 was the long end’s view of this possible ceiling.

Ceiling for what? It’s this part that I think so many get confused about in being confused over the yield curve. There’s two parts to it, the short as well as long end. The latter is an economic indication while the former is tuned by perceptions of money substitutes (including policy rates like IOER and RRP). It’s in the middle where those come together.

Continue reading The X’s and Y’s Of Jerome Powell & The Long End, As Calculated by Eurodollar Futures

My Leitner-esque Moment

By Kevin Muir

They’re back. I thought they had all given up, but like an old college buddy who’s going through a bad divorce and just needs a place to crash for a ‘few days,’ the corporate credit skeptics are a tough lot to shake.

This crew is a left-over remnant of the 2008 Great Financial Crisis. After watching the global financial system implode in a crisis that threatened to topple the entire world economy, there is a group of market participants who believe the next dislocation is right around the corner – only this time will be even worse given the increased debt levels. Although their views can be nuanced, usually they believe the market stresses from the last crisis will simply replay in a more dramatic fashion. In 2008 stocks fell, credit spreads exploded higher, VIX shot to the moon and sovereign long-dated bonds were the best asset to own by a long shot. Therefore at the hint of any trouble, they skedaddle to put on whichever part of this trade is most in fashion.

Continue reading My Leitner-esque Moment

A Familiar if Ominous Sign in the US IPO Market

By Callum Thomas

As the title suggests, a familiar if ominous sign has emerged in the US IPO market.  As I’ve previously written on a number of times, studying trends and statistics in IPO statistics (initial public offering) can yield key insights on the state of the equity market as a whole and the resultant risk vs opportunity outlook.

The chart in today’s blog comes from a discussion on the trends in the US IPO market from the Weekly Macro Themes report. That discussion aside from the negative earnings aspect, also looked at median age of IPO, proportion of foreign IPOs, and the pace of withdrawals and filings.

As alluded to, the chart shows the proportion of US IPOs with negative earnings.

Continue reading A Familiar if Ominous Sign in the US IPO Market

Inflation Around The Corner? February Inflation Muted (Core 1.8% YoY)

By Anthony B. Sanders

Janet Yellen kept saying that inflation was just around the corner, but apparently she meant one of those long New York City blocks.

The February inflation numbers are in almost exactly as forecast:  According to the BLS, CPI MoM declined to 0.2% MoM while CPI YoY rose slightly to 2.2%. CORE CPI MoM fell to 0.2% while CORE CPI YoY remained level at 1.8%.


Meanwhile, The Federal Reserve is merrily raising its target rate and letting its T-note portfolio mature in the face of whimpering inflation.

Continue reading Inflation Around The Corner? February Inflation Muted (Core 1.8% YoY)

Post-CPI Summary

By Michael Ashton

Below is a summary of my post-CPI tweets.

  • OK, 15 minutes out from CPI. Exciting one after last month’s WTF print.
  • Last month remember core CPI was +0.349% m/m, highest m/m in 12 years. 1.846% on y/y, so almost printing 0.4% and 1.9% which would have been emotionally challenging for the markets and Fed.
  • For this month, 0.17% is rough consensus on core. For the economists. The Street is leaning short of that number. The story is that last month’s CPI was pulled higher by one-offs.
  • But some of those things they think are one-offs, like Apparel, weren’t. They were reversing previous one-offs.
  • Maybe some of them were, but I don’t see many. I think another 0.3% is unlikely but the market – both bonds and stocks – would react extremely poorly if we got it, even if it was just rounded up to 0.3%.
  • Anything 0.18% and higher will cause y/y core to tick up to 1.9%. To go to 1.7% you’d need 0.07%. So bigger risk of an uptick.
  • At some level this isn’t really a risk…it’s going to happen over next few months anyway. Mar-July 2017 was 0.9% annualized on core CPI.
  • This month we’re watching apparel of course (+1.66% m/m last month). Also used cars & trucks, which everyone thinks is going down but I think is still going up.
  • And medical care, which looks a little like it might be hooking higher but has a long way to go. Hospital services is one place we could see mean reversion. If I made point forecasts, I’d probably be roughly on consensus. But I don’t. I spend my time thinking about risks.
  • …and while some of the risks to the consensus are lower, they’re already incorporating some mean reversion. Underlying pace of inflation is ~2.4% ex- the one-offs, so 0.17% is a bit below the ‘natural’ current run rate. And as I said the Street is leaning shorter than that.
  • Anyway, we’ll find out in 10 minutes. Either way, I’m on the TD Ameritrade Network at 3:05 to talk about CPI. Also, if you missed it check out the Odd Lots podcast I’m featured on this week: http://www.podbean.com/media/share/dir-zinyp-3b109f4
  • Going into the number, 10y Treasury yields are -1bp, Breakevens +0.25bp roughly, S&P futures +4.6.
  • Well 0.18% on core m/m, and 1.857% on y/y. Those economists are goooood. But that’s above where traders were looking.
  • Last 12 months. This does make the slope look less scary.

Continue reading Post-CPI Summary

AIG Breakdown

By Tim Knight

Remember American International Group? They’re the good people that got massively rich, blew up, demanded almost $200 million in retention bonuses from taxpayers (and got them) and went on their merry way. They’ve been chugging along ever since the long-forgotten financial crisis, but it seems to me the ol’ chart is starting to break down.


Continue reading AIG Breakdown

Energy Stocks

By Callum Thomas

This week the “Chart of the Week” looks at the energy sector of the S&P500 and specifically how it fits in in terms of market capitalization weight and share of total earnings across the index.  Simply put, energy stocks have fallen to the lowest market cap weighting since late 2003 (and again at the height of the dot com boom).  Part of this is down to the disastrous few years the energy sector has been through following the commodity crunch of 2014-16, and part of it is crowding-out from the super heavyweight sectors of Tech, Financials, and Healthcare.

The chart comes from a broader discussion in a report on the outlook for energy stocks and oil price.  With a number of short-term and medium-term factors lining up to at least support if not push oil prices higher from here, it raises the question as to whether this chart represents a long-cycle low point for the energy sector.

Continue reading Energy Stocks

There’s Nowhere to Hide

By Heisenberg

One of the questions that was front and center headed into 2018 was whether diversification was going to be harder to come by in an environment where bonds, stocks and credit were the most simultaneously expensive they’ve been in damn near 100 years.

While the stock-bond return correlation has been reliably negative for some two decades, it’s becoming harder to see how that can continue given stretched valuations in equities and the fact that the narrative around rising yields is changing. For most of the post-crisis period, rising yields were seen as a barometer of the robustness of the recovery. As long as that narrative stuck, stocks could not only digest rising yields, but could theoretically rally on the excuse that rate rise was down to optimism on the growth front (everyone clap for the reflation story).

Continue reading There’s Nowhere to Hide