Daily Economic Update: August 3, 2023
BoJ buys bonds in unscheduled operation to keep yields from rising too fast. Warren Buffet buys bonds because he's rich and Berkshire is the largest owner of T-bills ("there are some things people shouldn't worry about...This is one of them"). Bill Ackman shorts the 30Y treasury (via options) because Bill Ackman wants a hedge on equities and because he likes attention. Yields up 2bp on the 2Y back to 4.90% and the 10Y up 6bps to ~4.14%, if you were betting on the curve bear steepening that's the been the right call. BoE raises rates in a 3 way split vote to 5.25%, indicates Higherer for Longerer https://www.linkedin.com/pulse/powells-pivot-island-robert-mangrelli and brings down growth forecast. Bailey on the mic now. In LatAm Brazil cuts 50bps to 13.25% ,25bps was largely expected so it skewed slightly dovish, but statement was perceived as slightly hawkish...we'll see.
On the day ahead it's jobless claims, nonfarm productivity, durable goods, ISM services and Fed's Barkin
10Y yields hitting 4.18%, closing in on the October 2022 highs of 4.24%.
ReplyDeleteYesterday Ray Dalio posted about the current fiscal and monetary situations:
"Over the near term, if there isn’t a big supply/demand imbalance in which the amount of government debt sold overwhelms the amount of demand for these debt assets, it appears that a period of tolerably slow growth and tolerably high inflation (a mild stagflation) is most likely. Of course, there is a significant range of uncertainty around that because what we don’t know is greater than what we do know about a lot of influences (e.g., politics, geopolitics, the environment, and technology’s impact). However, over the long term, from looking at history and penciling out what is likely, it is virtually certain that central governments’ deficits will be large, and it is highly probable that they will grow at an increasing rate as the increasing debt service costs plus increasing other budget costs compound upward, and, as they increase, governments will need to sell more debt, so there will be a self-reinforcing debt spiral that will lead to market-imposed debt limits while central banks will be forced to print more money and buy more debt as they experience losses and deteriorating balance sheets."
AMZN earnings - beat on Operating Income by ~$3bln...is that good? How can analyst estimates be off by 3 billion? Looks like mostly driven by North American sales...that same North America that is on the cusp of recession.
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