Photo by Nadine Shaabana on Unsplash
Breaking
It was a crazy week in the bond markets - again. And in stocks, currencies etc. Actually mainstream assets. Crypto was subdued, commodities moved around but only as a derivative of the main players.
The chart above is US 10 year bonds over the last 3 weeks.
The much anticipated FED meeting resulted in rates on hold, as expected, and a change in tone and body language from Jerome Powell. Watch the video below. Gone is the higher for longer tone in every sentence.
Powell now has nothing to do. The market has tightened for the FED, and the market is now trading US Treasury supply. No-one is looking at what central banks do because the long end of the curve is driving everything.
The market turn around started with the US Treasury announcing it's funding requirements for the next six months. It was always going to be a colossal number but, because of the violent sell-off of the last few weeks, Treasury Secretary Yellen went with more bills and less coupons than the market anticipated. A good call, given the illiquidity, but kicking the can down the road.
As mentioned by Powell in previous speeches and by a lot of other central bank leaders, reckless fiscal spending and the rapid escalation in government debt, is driving inflation. And central banks cannot influence this.
Many market experts are saying "the Fed is done" but it's not rate hikes, it's that the central banks have lost control over economies.
Treasury bonds are losing safe-haven status, Mohamed El-Erian says [CNBC via Apple News]
https://x.com/LynAldenContact/status/1719077302858903697?s=20
Here's Stanley Druckenmiller with Paul Tudor Jones at the Robinhood conference :
https://x.com/Stephen_Geiger/status/1719025140455833987?s=20 [X]
And to cap the week off, Nonfarm Payroll came in lower than expected.
The Bank of England also left rates unchanged.
Japan's Interest rate decision
The Bank of Japan removed any explicit upper band ceiling to their yield curve control policy allowing 10 yield yields to move up towards 1%.
https://x.com/acrossthespread/status/1719203639607312732?s=20 [Weston Nakamura on X]
Monetary policy statement [BoJ]
Japan's monetary policy has for decades made the economy stagnant and now we're beginning to see major problems.
Exclusive: Weak yen forces Japan to shrink historic military spending plan [Reuters]
China
PMIs indicate that the bounce hasn't happened in the Chinese economy and debt is the big issue.
China Vows System to Resolve Local Government Debt Risks [Bloomberg]
Unites States
WeWork Plans to File for Bankruptcy [WSJ]
U.S bankruptcies rose 30% in the past 12 months [United States Courts]
UAW reaches deal with GM, ending strike against Detroit automakers [Reuters]
UAW reaches tentative deal with automakers. +25% wage increases over 4.5 years. This is more than the total increase in the last 22 years.
US manufacturing near three-year low; casts a shadow over econom [Reuters]
Canada
Canada enters a technical recession. GDP contracts -0.1% in Q3 [BNN Bloomberg}
Europe and particularly Germany are struggling with very low growth and elevated, but declining, inflation.
United States
ISM and PMI are forward-looking indicators and they're not looking good.
RBA confronts credibility crisis [AFR]]
The RBA monetary policy meeting is tomorrow with most forecasters calling for a hike.
New RBA Governor Bullock seems to be painting herself into a corner as the Treasurer Chalmers applies political pressure to keep rates lower. He's an academic, he's not had a real job. He doesn't realise that it's his own fiscal policy that is driving inflationary pressures.