The last time 10Y yields were this far above $SPX dividend yields was September 2007, the month stocks peaked
Source: zerohedge
Turkey's Aggressive Rate Hike Triggers 5-Year CDS Drop!
The Turkey Central Bank has taken a significant step in its battle against inflation by implementing a supersized rate hike of 750bps, bringing rates to 25%. This move was unexpected, as the market had anticipated a more "modest" hike to 20%. Turkish fixed income assets have responded positively, with the Turkey 5-year CDS retreating below 400bps. Even Turkey's US Dollar-denominated bonds saw a boost from the news. With the Central Bank of Turkey adopting a more orthodox approach to its monetary policy, the question arises: can they successfully bring inflation back to reasonable levels? To provide context, the latest inflation figure for the month of July was at a staggering 47.8%... Source: Bloomberg
A fresh increase in the Atlanta Fed’s GDPNow model reinforces the reasoning behind hawkish-for-longer monetary policy, which is weighing on equities and bonds
The latest model estimate shows real 3Q GDP growth of 5.9%, up from 5.8% on Aug. 16 (it was less than 4% two weeks ago). Source: J-C Gand, Atlanta Fed
Since the COVID Crash lows in March 2020, US equity markets have more than doubled the performance of bonds
As shown below, that's the best performance ever over a similar time window, topping the strongest stocks-bonds outperformance from the tech bubble of the late 1990s and early 2000s. Source: Bespoke, J-C Gand
This week has seen the biggest set of 'bad news' since April...
And that bad news prompted a very aggressive bid for global bonds with USTs tumbling 8-12bps on the day, leaving the long-end down 9bps on the week (but 2Y +2bps still) Source: www.zerohedge.com, Bloomberg
Duration risk in one chart. $1 million invested in this Apple AAPL bond is now worth $600k, duration risk is on stage here.
Now think of all those mortgage-backed securities on bank balance sheets... Source: Lawrence McDonald, Bloomberg
Higher real bond yields create a challenge for global equities valuations
Source: Bloomberg
Nice one by Steno research
While there are some fundamental reasons for US Treasury yields to keep rising (check out the Atlanta Fed Nowcast model poiting towards nearly 6% annualized real GDP growth in 3Q), what is currently going in China probably has some impact as well Source: Stenio research
