The growth rate of capital being poured into retail money market funds (MMFs) is at its highest level in several decades
Retail MMFs recently surpassed $1.6 trillion; a record high. Source: Koyfin @KoyfinCharts
Hedge Funds extended short positions on Treasuries to a record just before smaller-than-expected US bond sales and weaker jobs data spurred a rally
Leveraged funds ramped up net short Treasury futures positions to the most in data going back to 2006, according to an aggregate of the latest Commodity Futures Trading Commission figures as of Oct. 31. The bets persisted even though the cash bonds had rallied the week before. Source: Bloomberg
Ford's Rise to Investment Grade Sparks Historic Shift in Junk Bond Market!
Ford's recent credit rating upgrade to Investment Grade status triggered a remarkable $46.8 billion exit from junk bond indexes, marking the most significant reduction in the global junk bond benchmark since 2005. This makes Ford the largest "rising star" in history. It underscores a transformation in corporate priorities, with a heightened focus on financial resilience amidst economic uncertainties. The trend of "fallen angels" descending into junk status has notably decelerated, and analysts anticipate more companies achieving investment grade status in the coming years. Source: Bloomberg #Finance #InvestmentGrade #JunkBonds 📉📊📈
The sudden deterioration of US economic surprises is among the factors behind the recent decline in long duration bonds
Source: Bloomberg, Nomura, TME
Markets are now betting on big rate cuts next year
This chart shows that money markets have raised policy-easing wagers since the middle of October: by September 2024, the FED should have cut by 70 basis points, the ECB by 65 basis points and the BoE by 40 basis points. (pricing is derived from swap rates tied to policy-meeting dates) Source: Bloomberg
The Fed is now expected to start cutting rates in May 2024
Here's how bonds have performed during prior rate-cutting cycles... Source: Charlie Bilello
The crowd is piling into TLT (iShares US Treasuries 20y+ ETF) calls
Friday was the largest TLT call volume ever. Source: TME, GS
How low can the US 10-year bond yield go?
The US 10 year is breaking well below the short term trend line, hitting the 50 day right here. There is a small support here, but the bigger support is down around 4.3%. Note that the 200 day remains way lower, down around 3.95%. Source: TME
