Syz the moment

And it’s also not mainly about shorter term policy moves.” He probably has a point as #realyields are surging toward 2.5%, the highest since 2008. So what else can explain the surge in bond yields? Hints: 1) 1. A resilient economy — Q3 REAL GDP growth is expected to be around 3% annualized, well above trend growth of 1.5% to 2%, driven in large part by a resilient labor market and a strong consumer 2) Supply/demand imbalances — Given the growing U.S. fiscal deficit, the Treasury Department has been increasing its auction sizes for U.S. Treasury bills and notes. This year, the total amount of Treasuries issued in auctions is expected to climb to over $3 trillion, higher than at any year over the past decade (excluding 2020). This figure is expected to increase next year. Meanwhile, some of the natural demand for these bonds has moderated: The Fed is undertaking QT (reducing its holding of Treasuries by about $650 billion over the last year) and some foreign buyers, such as China, have slowly been reducing their holdings of U.S. Treasuries as well. Source: Lisa Ambramowitz, Bloomberg, Edward Jones

This was NOT supposed to happen. Remember: founding principle for the ECB is separation of monetary and fiscal policy. That's why ECB QE was initially subject to the capital key, so it couldn't favor one country over another. Could this last for ever? Source: Robin Brooks

Source: Lyn Alden

China pumped the most liquidity into its financial system via short-term monetary tool on record, suggesting policymakers are keen to keep funding costs low to bolster the economy. The People’s Bank of China granted lenders a net 733 billion yuan ($100 billion) of cash with the so-called reverse repurchase contracts on Friday. That came after data released this week flashed signs of a pickup in the economy last month, when consumer spending and industrial production came in stronger-than-expected. Lenders keep one- and five-year loan prime rate unchanged. Source: Bloomberg

US 10-year is just 3bp shy of 5%... Federal Reserve Chairman Jerome Powell acknowledged recent signs of cooling inflation, but said Thursday that the slowing in price increases was not enough yet to determine a trend and that the central bank would be “resolute” in its commitment to its 2% mandate. “Inflation is still too high, and a few months of good data are only the beginning of what it will take to build confidence that inflation is moving down sustainably toward our goal,” Powell said in prepared remarks for his speech at the Economic Club of New York. “We cannot yet know how long these lower readings will persist, or where inflation will settle over coming quarters.” Source: CNBC, Ole S.Hansen, Bloomberg, Saxo

Confidence in the Chair of the Federal Reserve has reached its lowest point in 20 years... By Visual capitalist

There's now a ~49% chance of a rate hike by January 2024. There is even an 11% chance of a rate hike in July 2024... Meanwhile, the 10-year note yield is nearing 4.90% right now. Will 8% mortgages soon going to look like a good deal? Source: The Kobeissi Letter

The move adds to recent efforts to ensure hitting GDP target - Offers Most Cash Support Since 2020 - Bloomberg China’s central bank is making the biggest medium-term liquidity injection since 2020, stepping up efforts to support the nation’s economic recovery and debt sales. The People’s Bank of China added a net 289 billion yuan ($39.6 billion) into the financial system via a one-year policy loan on Monday, the most since Dec. 2020. At the same time, it drained a net 134 billion yuan of short-term liquidity through open-market operations.