Back in the time when Alan Greenspan was the Fed Chair one of the things he said is when he’d wake up in the morning the first market check he did was the 10 yr yield. I’ll argue that now is the time to wake up and see where the 30 yr yield is trading at in gauging the markets opinion of growth and inflation because the Fed has polluted the market messaging of the 10 yr and the 30 yr is the furthest away from their influence and distortions. It’s a shame that this is what our bond market has become, walking dead across most of the curve, but it is what it is. After touching 1.43% yesterday after the bad auction, the 30 yr yield is down 2 bps today but higher by almost 20 bps on the week. Here is a chart of the 2s/30s spread.
I’ve talked about what’s going on with US and European rates this week but the story is global. The Japanese 10 yr yield, subject to YCC, is matching the highest level since March. Their 40 yr yield, least affected by YCC, is just 3 bps from the highest since March. The Aussie 10 yr yield is at the highest in 6 weeks while the South Korean 10 yr yield is at a one month high, to name a few.
China reported some July data and the results were mixed. Retail sales unexpectedly fell by 1.1% y/o/y instead of rising by .1% as forecasted. Industrial production did rise by 4.8% as factories are all reopened but that was slightly below the estimate of a 5.2% gain. Fixed asset investment year to date and y/o/y fell by 1.6% as expected vs the drop of 3.1% in June, helped by a rise in property investment, the go to area of the Chinese economy. Notwithstanding the mediocre numbers, the Shanghai comp was higher by 1.2% and the H shares were up by .2%. The rest of the region was very mixed.
The news last night that the UK was reimposing travel restrictions from people coming from France, the Netherlands and Malta smack in the traveling loving month of August has put a dampener on European stocks today. These countries follow the needed quarantine from those coming from Spain that was imposed 3 weeks ago. Travel and leisure stocks are leading the decline. In the search for value, some European stocks provide it.