Stocks and Treasuries are very correlated again
Source: Goldman Sachs, The Market Ear
AI is a hot topic in earnings calls
Source: FT
Netflix and YouTube combined are responsible for 31.5% of global internet traffic
Source: Statista
Highest default rate in the US High Yield market since september 2021!
There is some stress building in the U.S. high yield bond market, with the highest default rate since September 2021 occurring in January! While the default rate remains low (2.2% in January), U.S. high yield corporates are being downgraded at their fastest pace since 2020. A sign of future economic deterioration? Source: Bloomberg, Moody's.
The entire US Treasury yield curve back above 4% !
What a change in one month! The 10-year U.S. Treasury yield has risen about 70 basis points in one month and the entire U.S. Treasury yield curve is now trading (each key rate) above 4%. Recent economic and inflation data has caused investors to revise their outlook on U.S. monetary policy. A terminal rate of 5.5% is now expected by September and no cut in 2023. Note that for the first time, fed fund futures prices are forecasting a higher rate for the March 24 futures contract than for the March 2023 contract. Source: Bloomberg
Today is 1st of March: ECB Passive Quantitative Tigthening (QT) begins
From today onwards, the European Central bank (ECB) will reduce the size of its balance sheet by €15bn per month (until June). ECB assets currently stand at €9T, of which government bonds €5T. Markets swallowed an effective net debt supply of €280bn in 2022, but with QT 2023's it balloons to + €600bn. Source: Bloomberg, Valery Tytel, Gustavo Philippsen Fuhr
Long term inflation expectations higher in Europe than in US!
For the first time in more than 10 years, markets expect long-term inflation to be higher in the Eurozone than in the U.S. A direct result of the fact that the FED seems to be fighting inflation more aggressively than the ECB? Source: Bloomberg
The market now expects the ECB to raise its key rate at the highest level ever!
As reflected in the European swap market, market participants expect the ECB to raise its key interest rates to a level never before seen. The terminal rate is expected to be close to 4%, up from 3.75% in the early 2000s. Interestingly, for the first time in this cycle, the markets believe that the terminal rate will be reached in 2024 (and not in 2023). Higher rates for longer? Source: Bloomberg.
