Daily Economic Update: October 9, 2023

The U.S. bond market is closed today, but equity markets are open.  While markets continue to interpret the large headline Jobs number from Friday, it is the unanticipated attack by Hamas on Israel has markets attention, especially oil markets where crude is up 3% this morning.   While geopolitics slide back into focus, markets will still get a slew of data this week with the highlights being the inflation reports (CPI and PPI) as well as the minutes of the last FOMC meeting.   Bank earnings and plenty of Fedspeak are in the mix as well.  On the week ahead:

Today:  Fedspeak from Logan and Barr

Tue: Wholesale inventories, NY fed inflation expectations, Fedspeak

Wed:  PPI, FOMC Minutes, moar Fedspeak

Thur: CPI, jobless claims, more Fedspeak

Fri:  import prices and UofM

XTOD: Iran Helped Plot Attack on Israel Over Several Weeks: WSJ  here we go

XTOD: Nonlinearity: Could Ozempick cause a deflation in the price of food? A mere 1% drop in demand can cause a significant overload.

XTOD: Brookfield Property Risks Being Cut to Junk on Refinancing Needs  @business  #CMBS 

S&P is considering cutting Brookfield to junk status because the company has “substantial” amounts of maturing debt to refinance during a time of higher interest rates and lower property values

XTOD: Goldman Sachs raises $15bn to buy stakes in private equity funds via @FT  “an appropriate discount”  Wait, they weren’t worth what they were marked at?  Well knock me over with a #volatilitylaundered feather.

XTOD: Crowding out is a real thing.

XTOD: "I continue to be amazed that people think you can do what we’ve done over the last 15 years, then jack rates this high and everything’s going to be fine. 

Am I open to being wrong? Yes, but it's kinda gonna be one of those 'Paul on the road to Damascus' moments where if I'm wrong, my religion needs to change. If I'm wrong, everything I know about finance needs to be uprooted and spun around on its head." Well put by  @KYRRadio

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XTOD: Treasury yields were already challenging the Fed’s control over interest rates (see link below). Global financial uncertainty connected to attack on Israel (and repercussions) may cause turmoil in Treasury market if foreign holders start scrambling for U.S. dollars; while Treasury securities are traditional “safe haven” when global tensions rise, we saw in March 2020 that the Treasury market froze while demand for dollars skyrocketed. Are Fed officials gaming out enhanced use of FIMA repo facility (repurchase agreement that allows foreign central banks to get cash from Fed in exchange for their Treasury securities so they don’t just dump them) and currency swap arrangements? Perhaps we need to exercise greater discernment over which foreign central banks are entitled to this privilege? Under Bretton Woods, the goal was to provide for currency stability among allied nations. And what are the monetary policy implications of providing vast amounts of dollars to foreign central banks with no control over how they are further loaned. 

The autumn bond rout is challenging Wall Street’s longstanding belief that the U.S. government can’t sell too many Treasurys https://wsj.com/finance/investing/government-spending-hurting-bond-portfolio-8a063f39?st=5lmkje3nh7kwef5 via  @WSJ

https://x.com/zerohedge/status/1711121799344226594?s=20

https://x.com/nntaleb/status/1710307490292736471?s=20
https://x.com/danjmcnamara/status/1710351754536132900?s=20

https://x.com/CliffordAsness/status/1710332347587969225?s=20

https://x.com/TimDuy/status/1710300986076516378?s=20

https://x.com/kofinas/status/1710267911015739902?s=20

https://x.com/judyshel/status/1711086074112430464?s=20