China eases, cutting their RRR by 50bps which should open up over $140bln in new loans. Chinese authorities also cut certain repo and mortgage rates by 20bps, while making some regulator changes to spur demand for homes and stocks. Elsewhere in Asia, BoJ talked tough on inflation and the Aussie central bank held rates at 4.35% for the 7th straight meeting, so far abstaining from the rate cutting frenzy as they remain vigilant against inflation risk.
Stateside, the Conference Board's Confidence data dissappointed with an uptick in recession probability and a worsening "labor differential". Not in most of the headlines, the survey also showed an uptick in inflation expectations for the next 12-months to 5.2%.
In fedspeak, Bowman, AKA 'the dissenter', expressed concern that the Fed's fight against inflation may stall and that the neutral rate may be much higher than it was pre-pandemic. She also expressed concerns around geopolitical risk related to supply chain disruptions and fiscal policy as creating upside risk to inflation. She didn't seem overly concerned about labor markets, but noted the cooling.
Stocks at all-time highs again, led by tech. Caroline Ellison going to jail for 2 years. The 2Y auction was 'meh', but probably as expected with yields having fallen as much as they had recently. Closing the day, the 2Y at 3.54% and 10Y at 3.74%. Witht the 2s10s uninverted are you betting on a further steepening? Bill Gross provides some context see XTOD down below.
XTOD: The trends in China are really quite worrying. This isn't a crash like scenario where demand will suddenly be destroyed and intl markets will drawdown. It isn't 2015. But I'm afraid China is in a decaying spiral that is getting impossible to climb out of.
XTOD: R.I.P. inverted yield curves.
XTOD: Yield curve trades working well Would not add here — due for a few weeks rest but last 25 years 2/10 curve avg — 107 Now — 18
XTOD: Almost everything is noise. A tiny fraction of things are enormously valuable. They are hidden many layers below the surface.
https://x.com/countdraghula/status/1838457018665046248
https://x.com/lisaabramowicz1/status/1838503823964348549
https://x.com/GregoryMcKeown/status/1838561189347102866
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