With the ever narrowing of the yield curve and the 2s/10s spread at a fresh 10 yr low at just below 62 bps we all find ourselves debating the reasons. I think it’s simply just two as I’ve stated before, 1)worries about the ability of the US economy to withstand QT and more rate hikes as its paid to flatten the curve in the last two rate hike cycles, 2)the lid kept on …
Starts, Hurricane Rebound and Multi Family Too
Housing starts in October totaled 1.29mm, 100k more than expected and up from 1.135mm in September (revised up by 8k). It’s the best in a year and was mostly driven by a rebound in multi family starts which spiked by 111k to 413, the most since January. Single family starts rose by 44k but after dropping by 38k in September. At 877k, it matches the highest level in …
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The Committee to…/NFIB/Chinese Interest Rates/UK Inflation
Seeing Janet Yellen, Mario Draghi, Haruhiko Kuroda and Mark Carney on stage together today in Germany had me thinking that it’s the Committee To Lever Up the World and Destroy Price Discovery. It was February 1999 when Time Magazine printed a cover with Rubin, Greenspan and Summers and called them The Committee to Save the World. Voting Fed member Charles Evans is …
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China/Looking for Some Fun?/Central Bank Speak
Credit growth slowed in October in China as total loans extended totaled 1.04T yuan, 50b below the forecast, down from 1.82T in September but still up 17% y/o/y. Of this, 663b were bank loans with most of the balance coming from corporate bonds and trust loans. With the cause of the m/o/m slowdown in loans we of course don’t know what was a purposeful crackdown on …
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Confidence Falls Back to Near Average YTD
The UoM consumer confidence index for November fell to 97.8 from 100.7 and that was 3 pts below the estimate but comes after a 5.6 jump in October that put it at the highest level since 2004. Both main components of Current Conditions and Expectations fell by an equal amount m/o/m. One year inflation expectations bounced back by two tenths to 2.6% after falling by 3 …
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What a Bunch of Babies!
That didn’t take much. A slight fall in the stock market from all time record highs and one week of selling in high yield and I saw this last night from NRG Energy, a B+ credit: “NRG Energy announced today that is has decided not to proceed with the previously announced offering of $870mm in aggregate principal amount of senior notes in response to broader market …
Some Interesting Stuff Going On
I pointed out yesterday the market has become more selective as measured by the diverging internals which has coincided with another extreme level of bullish sentiment (could mean something, could be nothing). Also of note is the weakness in high yield credit. It looks like a blip and also could mean nothing but with high yield valuations egregious, pay attention. …
Longer End Auction Better Than Short End, Consistent With Flattening
The 10 yr note auction was better than the lackluster 3 yr yesterday. The yield of 2.314% was a hair below the when issued of about 2.316%. The bid to cover of 2.48 was a touch above the one year average of 2.42. Also reflecting decent demand, direct and indirect bidders took 77% of the auction vs the 12 month average of 70%. Bottom line, I’ve attributed two …
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50 pts and Bad Breadth/March on Eccles Building and Other Things
Bullish sentiment got even more euphoric this past week according to the II survey. Bulls rose .9 pts to 64.4%. In 1987 it got as high as 65. With Bears remaining unchanged at 14.4%, the lowest in 30 months, the Bull/Bear spread is now 50 and is just .5 pt from matching the peak in early 1987. I’m saying again, when looking at the broad market this year, when Bulls …
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A Note Auction, Another Lackluster One
After some really mediocre Treasury auctions a few weeks ago notwithstanding multi year highs in yields (for the shorter term auctions), today’s 3 yr was also very ordinary. The yield at 1.75% was a touch above the when issued. The bid to cover at 2.76 was slightly below the previous 12 month average of 2.81. Direct and indirect bidders took 62.5% of the auction which …
Peter is the Chief Investment Officer at Bleakley Advisory Group and is a CNBC contributor.