One of the most important chart in the asset allocation decision process:
Stocks vs. long duration US Treasuries. The trend is your friend Source: J-C Parets
To the moon!!! US Treasury boosts April-June borrowing estimates to $243b from $202b.
US reiterates a cash-balance estimate of $750bn for the end of June. US Treasury cites lower cash receipts for bigger borrowing estimates. No Mrs Yellen, this is not virtual reality... (picture stollen to Jim Bianco)
Treasury bond issuance in 2024 is expected to hit $1.9 TRILLION.
Surpassing levels seen even during the 2008 financial crisis and 2x 2023 levels. Source: Game of Trades
Bonds rally as the Fed’s preferred inflation metric cam out not as bad as feared.
PCE deflator rose to 2.7% in March from 2.5% in Feb vs 2.6% expected. Core PCE, the Fed's preferred measure of underlying price pressures, remained at 2.8%, compared with an anticipated fall to 2.7%. First full rate cut is now priced for November. Note that we now have CPI, PPI and PCE inflation RISING for 2 straight months. Source: HolgerZ, Bloomberg
The us 10-year note yield rises to 4.73%, its highest level since November 1st, 2023.
This puts the 10-year note yield ~100 basis points above its December 2024 low. With just 1 interest rate cut now expected in 2024, discussions of more HIKES are back. If todays' PCE inflation data confirms that hashtag#inflation is back on the rise, we could see futures price out the last cut. Source: The Kobeissi Letter
"The stock-bond correlation switch is the ultimate diversification regime shift."
"You don't have as great a need for alternatives when the correlation is negative. Investor search for diversification should be at a heightened level." Source: BofA, Darren
Pension Funds are now withdrawing billions of dollars from the stock market and instead allocating to bonds and private markets.
CalPERS, the country's largest public pension fund, is reportedly planning to withdraw $25 billion from stocks soon. Source: Barchart, Reuters
BREAKING: The 10-year note yield is now up 90 basis points YTD and nearing 4.70% for the first time since November 2023.
As treasury yields rise, we are seeing further pressure on stocks and other risky assets. Meanwhile, the base case now shows just 2 interest rate cuts in 2024. Higher for longer is officially back and interest rates are surging quickly. Source: The Kobeissi Letter
