TIPS - A Revival in Focus!
Long-term U.S. Treasury Inflation Protection Securities (TIPS) have witnessed a significant double-digit decline since the start of 2022, despite the presence of high U.S. inflation. While the inflation-linked component has acted as a safety net, providing a cushion of around 10% over 20 months, the surge in the 10-year real rate from -1.0% to 2.2% over the same period has had a marked and negative impact on the total TIPS yield (-14%). Yet, the question lingers: Is now the opportune moment to contemplate TIPS? We are currently at a level of LT real rates (2.23%) not seen since 2008. Interestingly, TIPS exhibit a lower beta compared to U.S. Treasuries (currently standing at 0.8). This attribute becomes especially valuable in light of the considerable volatility in U.S. interest rates (with the MOVE index still >100). hould we delve into the realm of inflation-linked bonds, which constitute a global market valued at over $3.5 trillion? This consideration gains significance as uncertainties surrounding inflation persist, driven by factors like de-globalization, supply shocks, increased fiscal spending, and the ongoing transition to renewable energy sources. Source: Bloomberg
Zero Day Options (0DTE) now account for half of total SP500 options volume
Source: Barchart
First time in 2023 that ElectionBettingOdds has had Trump in the lead
Source: Bespoke
Flows are still not coming into publicly-listed bitcoin funds (including etfs)
Source: JPM, TME
This chart tells the story:
The rate priced in for the Fed’s December 2024 meeting hit a new high for this cycle at 4.7%, meaning investors have sharply trimmed their hopes of interest rate cuts in 2024. Source: HolgerZ, Bloomberg
Humility
Source: Strati Georgopoulos
0DTE trading in $SPX options accounts for a record 49% of total trading volume
Source: Markets & Mayhem
Crude oil prices are booming and is now up 34.5% since late June BUT THIS IS NOT JUST A SUPPLY STORY - WATCH OUT DEMAND AS WELL!!!
The OPEC+ (Saudi/Russian) production cuts are the easy culprit to blame for higher prices. They do matter. But another equally important factor is booming demand. Bloomberg uses Department of Energy data for production, imports, and inventory changes to "input" the weekly demand for crude oil. Below is a five-week average to smooth the noise. Demand is through the roof! This suggests the economy is okay (aka "no landing") as there are few if any, signs of "demand destruction." The combo OPEC+ cutting back + demand booming = 34.5% crude oil rally in 10 weeks... Is there more to come? Source: Jim Bianco
