The story of yesterday >>>
US 10 year yields are back to Liberation Day while stocks are 10% lower...Are US Treasuries losing their safe have status? Or was it related to China dumping more treasuries as part of their retaliation plan? As Goldman's Mike Washington writes, there were lot of client questions on what is behind the higher yields; GS rates specialist Mike Cassell writes, “A lot of supply coming up in 10s and 30s later this week...and we are seeing increasing numbers of clients worried about stagflation + fiscal expansion+ lack of sponsorship of issuance. On the stagflation note, we had FOMC Kugler out earlier today saying inflation more an urgent issue than growth...this is a toxic mix if so. Flow wise we have seen HF paying the belly in swap and large selloff/steepening on futures flows.” And of course, China may well be selling in retaliation to Trump's tariffs; we'll know soon enough. Source: www.zerohedge.com, Bloomberg
Will global sovereign bond yields soon catch-up with UST yields?
As highlighted by Mohamed El Erian >>> "The markets' initial reaction has been to focus on the likely US growth slowdown, thereby narrowing the yield differential of the US relative to other advanced economies and weakening the dollar. It is only a matter of time until markets realize that the "beta" of the rest of the world to lower US growth is much closer to 1, if not above 1. You know, it's the old saying: When the US catches a cold, the rest of the world risks something much worse". Source: FT
US credit spreads are widening
Source: zerohedge
Japanese 10-Year Bond Yield jumps to highest level since the Global Financial Crisis 🚨
Source: Barchart
🔴 Germany’s 10-year bond yield rising to 4% is “entirely feasible” as a reset in the country’s borrowing costs plays out, according to Aviva Investors.
The rate surged to nearly 3% in recent weeks as Germany’s incoming chancellor spearheaded a huge spending package that is expected to lead to billions of euros in extra bond sales. Vasileios Gkionakis, senior economist and strategist at Aviva Investors, says yields are likely to keep rising as the fiscal measures boost economic growth. ➡️ 4% for German 10-Year Bund would mean German mortgages at 5% to 6% and the burst of the epic German real estate bubble. Would it also mean Italian, Spanish and French bonds yields at a level that could trigger the next Euro crisis. Good luck. Source: Bloomberg
Bonds don't love the cooler-than-expected February CPI report
Weakness in airfares may not show up in the PCE, the Fed's preferred gauge, which pulls that price data from the PPI And still-firmer goods prices could lead to core PCE, for a change, running higher than core CPI Source: Nick Timiraos @NickTimiraos
Japan 40Y bond yield hits highest in history.
Eventually markets will remember that Japan has to roll over the world's biggest debt load ever assembled. Source: Bloomberg, www.zerohedge.com
A clear message from the market:
Cyclicals vs defensives peaked in late January, with underperformance accelerating in mid-February. If you add to this the inverted 3m-10y yield curve, the odds of recession are on the rise. Source: Bloomberg, RBC
