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12 Jun 2024

BREAKING: Prediction markets officially price-in 2 interest rate cuts this year after CPI inflation data.

The odds of no cuts have fallen from 33% to 24% over the last few minutes, according to @Kalshi. Meanwhile, market implied odds of exactly 2 rate cuts have spiked from 21% to 35%. Less than 2 months ago, the base case showed 0 rate cuts in 2024 with odds of rate HIKES spiking. 6 months ago, markets showed a base case of 6 interest rate cuts in 2024. Source: The Kobeissi Letter

12 Jun 2024

The global debt crisis: Total world governments' debt hit a whopping $315 trillion in Q1 2024, a new all time high.

In Q1 alone, total global debt increased by $1.3 trillion. At the same time, emerging markets debt hit $105 trillion, rising by ~$50 trillion in just a decade with the biggest increase in China. Across developed markets, the US and Japan have added the most debt. Currently, the global debt-to-GDP ratio has surged to 333%, just below a record high of 362% in 2021. Debt is becoming the global "solution." Source: The Kobeissi Letter

12 Jun 2024

The US is adding almost $100B of deficit PER WEEK

Source: Geiger Capital

12 Jun 2024

Inflation forecasters see the core US CPI posting roughly a similar increase in May as in April.

An increase of 0.28% in the core CPI would lower the y/y rate to 3.5% Source: Nick Timiraos, Wall Street Journal

12 Jun 2024

Bonds, stocks, gold and cryptos rally following cooler-than-expected US inflation data.

May headline CPI slowed by 10bps to 3.3% YoY vs 3.4% expected. Core slowed 20bps to 3.4% vs 3.5% expected. Super Core CPI TURNED NEGATIVE (!) -0.05% MoM - its first drop since Sept 2021 (but that left the YoY level still above 5.0%). Details: CPI data for May 2024 • Inflation was softer than expected in May: headline 0.0% MoM vs +0.1% expected; “core” inflation +0.2% MoM (+0.163% unrounded) vs +0.3% expected • As a result, the yearly headline inflation rate is down to +3.3% (after +3.4% in April) and the “core” inflation rate is down to +3.4% (+3.6% in April), its lowest level in three years. • Inflation is still above the Fed’s target of 2% but the trend toward slower inflation has resumed, after the upside surprises of the first quarter of the year. - Housing (shelter) inflation remains firm, but CPI inflation excluding shelter (+2.1% YoY%) is now back (almost) at the level targeted by the Fed. - Inflation in services, that has been strong in the previous months, is finally slowing down (+0.2% in May vs +0.4% in April and +0.5% in March). - Prices of durable and nondurable goods have declined in May (-0.5% and -0.4% respectively). • Those data confirm our scenario of a gradual disinflationary trend at play in the US, as labor market tensions ease and consumer demand loses some momentum. Impact on the hashtag#Fed • Following the release, and ahead of the Fed’s meeting tonight, the probability of a Fed rate cut in September has increased to 62%, • A Fed rate cut at the November meeting (two days after the US Presidential elections) is now fully priced in. • Future markets also fully price a second rate cut at the December meeting. • After the FOMC meeting tonight (no rate cut expected), Fed’s members will update their economic and rate projections. • Those CPI data are probably a relief for the Fed and will likely prevent hawkish surprises and significant revisions to the upside on the expected path of Fed Fund rates in 2024 and 2025. Source: HolgerZ, Bloomberg

10 Jun 2024

IMF warns the U.S. needs to reduce its debt burden or else....

Source: FT, Barchart

7 Jun 2024

Austria’s hawkish central bank chief Robert Holzmann was the sole dissenter on ECB rate cut, BBG reports, citing a person familiar with the matter.

Source: HolgerZ, Bloomberg

7 Jun 2024

As highlighted by Tavi Costa:

Despite quantitative tightening in most developed economies, their money supply continues to grow substantially, undermining their policies in a significant way. "Today's ECB decision to cut rates highlights how central banks are trapped and forced to reinstate financial repression even as inflation remains higher than historical norms. These policies act as a relief valve to alleviate financial stress, leading to a surge in prices of hard assets with limited supply". Source: Crescat Capital, Bloomberg

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