Risk off Tuesday. Yields down 2-10bps across the curve, 2Y down 3bps to 4.73% and 10Y down 10bps, breaking below 4 to 3.99%. Equity future indexes off 1%. The catalyst appears to be China and Italy, with China trade declining, exports down 14.5% and imports declining. Then in Italy, the govt passed a 40% "windfall" tax on bank profits. Add to that Moody's downgrade of 10 small and midsize banks (including M&T) with eyes on downgrading some major lenders citing rising funding cost and weakness in CRE loans.
On the day, we get our first dose of Treasury supply with the 3Y note auction:
Tue: Trade balance, inventories, 3Y note.
TTOD: Remember when this place was an amazing resource?
TTOD: John Cochrane: "As inflation eases, representatives of different schools of thought are taking victory laps. But who really deserves one? What have we learned about inflation?
I think episode is a smashing confirmation of the fiscal theory of the price level." T or F?
TTOD: Manufacturing nations are running up against a generational problem: Younger workers, better-educated than their parents and veterans of Instagram, TikTok and other social media, are deciding their work lives shouldn’t unfold inside factory walls.
TTOD: The 2008 housing crash wasn't caused by subprime mortgages, that was just the scapegoat they used to hide the real issue so it could be perpetrated again. The 2008 housing crash was caused by prime borrower speculation/investment (Duke University study). We already knew we had another larger speculative mania (cause of GFC), what I didn't know is that it likely MUCH worse than I could have imagined.
The good news is we're all about to find out unless someone eats another bat and they print 45% of the currency again.
TTOD: Most of Africa is a no fly zone right now. Is that where global superpowers have decided to fight WW3 as a proxy war?
Philly Fed President and voter Patrick Harker says the Fed may be at the end of the hiking cycle. A message that is at odds with Fed Governor Bowman.
ReplyDeleteCredit Card balances in the U.S. passed $1 trillion for the first time. The NY Fed post states: "Despite the many headwinds American consumers have faced over the last year—higher interest rates, post-pandemic inflationary pressures, and the recent banking failures—there is little evidence of widespread financial distress for consumers"
ReplyDeletehttps://libertystreeteconomics.newyorkfed.org/2023/08/credit-card-markets-head-back-to-normal-after-pandemic-pause/