Yields little changed to start the day, with the 2Y at 5.05% (up from 4.87% to start last week) and the 10Y at 4.64% (up from 4.60% to start last week).
Last week ended with Moody's putting U.S. sovereign debt ratings watch negative, calling attention to the U.S. fiscal situation, and, separately, a UofM consumer sentiment report that showed inflation expectations rising. The week ahead features CPI data, retail sales and industrial production. The possibility of a government shutdown also comes back into focus as does U.S. - China relations with Biden and Xi meeting in San Francisco on Wednesday.
On the week ahead:
Monday: NY Fed Oct Inflation Expectations Survey
Tuesday: CPI, Fedspeak including Williams and Jefferson
Wednesday: Retail Sales, PPI
Thursday: Jobless Claims, Industrial Production, Fedspeak
Friday: Housing Starts, Building Permits and Fedspeak
XTOD: Governments like to force bondholders to share part of the burden when they ramp up spending. See e.g. recent work by Hall and Sargent
XTOD: *US 5-10 YR INFL. EXPECTATIONS RISE TO 3.2%, HIGHEST SINCE 2011
Highest since the Arab Spring ... partially a reaction to a spike in food prices -----
But don't worry, Powell said this at last week's presser -- Despite elevated inflation, longer-term inflation expectations appear to remain well anchored, as reflected in a broad range of surveys of households, businesses, and forecasters, as well as measures from financial markets. -- The Umich 5- to 10-year inflation expectation is considered the most important inflation expectation measure. This is why last year and into earlier this year, this measure was considered a market-moving event, while no other measure of inflation expectation was viewed as this important. Again, now that it is at a 12-year year high, Powell wants to "just close the #^%$ door" on this measure, per his comments last week. Just say "well anchored" despite a 12-year high, and you can also conclude there is no inflation problem anymore.
XTOD: Spitz: "We're likely now in a brief Goldilocks zone, and no one expects it - more squeeze-up and blow-off in risk assets, which l've been writing and saying for a year...Then Papa Bear shows up, and it will be too late to react."
XTOD: While "the media are screaming about the agony, there’s a huge population...that is quietly rejoicing in the higher interest rate environment. And it’s time we talked about them a little more" "the rising cash rate is a huge lever driving their income, spending and confidence."
XTOD: That money is viewed as a tool or symbol of sovereignty today isn’t due to either its technical attributes or to the fact that nations can’t survive and prosper unless their governments control it. Instead, the view persists simply because government control of money has been so common for so long. In ancient and medieval times, before the days of thick government bond markets, govt’s asserted this control so they could finance their activities by resorting to debasement. Money was then and truly a pilar of “sovereignty” in the literal sense: a tool by control of which absolute monarchs supported themselves. The same monarchs often monopolized soap manufacture, candle making, salt and mineral mining, and all sorts of other enterprises, for the same reason, declaring these monopolies to be essential sovereign prerogatives. W/ the advent of democracy those “prerogatives” went the way of absolute monarchy itself. But the notion of “monetary sovereignty” managed to persist. It’s high time that we rid discussions of monetary and banking policy of this embarrassing vestige of medieval thinking.
XTOD: Lorie Logan's speeches are always so damn good. One q she tries to answer: Why even bother with QT, risking reserves falling too low? She says 1) a big balance sheet makes monetary policy comms harder, & 2) ample reserves tilt liquidity in favor of banks, at a cost for nonbanks:
XTOD: Still staying far away from 2's. 100'28 seems interesting. Druck Bro's betting big on CPI and PPI next week which I think everyone on the planet (including me) expects to be ice cold. H4L Baby!
XTOD: "I always tell the kids, 'You know what's great about going the extra mile? There's very little traffic.'" ―Jim Larranaga
XTOD: The power of compounding: Combs was not good at anything in particular, he was not a specialist, but rather a generalist who combined the different life experiences he had into a powerful force for investing. He has compounded his knowledge, range, and relationships.
https://x.com/HannoLustig/status/1723127784502116703?s=20
https://x.com/biancoresearch/status/1723026505150996915?s=20
https://x.com/nntaleb/status/1722972407344791896?s=20
https://x.com/clintballinger/status/1723674705864142999?s=20
https://x.com/GeorgeSelgin/status/1722519169940271200?s=20
https://x.com/StevenKelly49/status/1723014427165757567?s=20
https://x.com/dampedspring/status/1723317292421759093?s=20
https://x.com/goldmedalmind/status/1723163978875163083?s=20
https://x.com/InvestInAssets/status/1723306686721528100?s=20
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