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Oct 20, 20225 min read

CNH 7.25 / JGB's.. USDJPY/ Uniper / German PPI 45% / UST10y 4.15%/ Dutch CB to PF's

  • UST yields above 2008 highs, mortgage demand on 25y lows, house prices falling at fastest rate since 2002, inflation about 9/10pct for the whole of the year, GBP going be negative for -2- straight quarters – all recessions like facts

  • Dutch Central Bank urges pension funds to guard against UK-style crisis-FT

  • "Downing St on Tuesday confirmed the triple lock was no longer guaranteed, sparking criticism and hostile headlines. But in a sign of how Truss is being forced to govern from hour-to-hour, on Wednesday morning she told Hunt the triple lock must stay"

  • Real estate investors circle as property funds offload offices and warehouses. There is a gap between buyers and sellers on what constitutes fair value-FT

  • Rabobank on Biden's latest SPR drain: "The administration also claims this action should be a signal for the domestic energy industry to ramp up output, despite it implying the opposite."

  • German CPI likely to rise with PPI at 45%..highest since...a very very long time, 1949 I believe

  • UK politics, it’s happening so fast, no point talking too much about it !

  • USDCNH hit a 7.28 overnight – recovered a little bit on this : Chinese officials are debating whether to reduce the amount of time people coming into the country must spend in mandatory quarantine, according to people familiar with the discussions

  • After U.K. Market Blowout, American Officials Ask: Could It Happen Here? – NYT - "Multiple officials said this week that they expected the #Fed would step in to buy bonds"

  • The aggregate flows of 100 biggest US-listed equity ETFs over the past 60 days are firmly positive, while according to EPFR Global data, stock funds have attracted $169 billion in assets since the start of the year, led by ETFs while mutual funds saw redemptions – Bloomberg

  • The Bank of England is set to respond to changes in Britain's tax and spending policies under Prime Minister Liz Truss but it remains to be seen if interest rates go up as much as investors have been expecting, Deputy Governor Ben Broadbent said

  • Uniper - Gashändler Uniper könnte bis zu 40 Milliarden Euro zusätzlich brauchen, another 40bn going

 
Markets :

  • 10year U.S real rates jumping to about 1.7%, highest since 2009 credit crisis time, bond market saying, ‘there is stress in the system, clearly’ (chart-thread ), UK 10-year yields now 23 basis points lower than US 10-year yields

  • Equity markets struggled to extend rally yesterday, amid a sharp rally in UST yields

  • Bonds, long-ends selling off with ease, yields higher pretty much across board, not ideal

  • USD remains firm(er), following yields, consensus view by now, very valid though till whenever Fed official say pause on rates. USDJPY 150, USDCNH 7.24, USDCHF might even be breaking up too

  • UST’s dictate what equity markets do (and USD follows)

  • JGB’s going to break soon, although I could have said this a long while back, but with long-ends all higher in yields terms it’s really hard to think this 25bp lid holds much longer, unless of course JPN wants its currency to crash further and push PPI for ever higher >>> IMHO it’s not a matter of if, but when it happens..so do watch out JGB’s and JPY...

 

Credit markets flash warnings as rates soar – Axios Link: https://bit.ly/3gnB861

Names like Primark and H&M are already popular with U.S. consumers because of their low prices. Now, brands like GU - who offers $30 sweaters and $60 coats - are also trying to use inflation to their advantage and drop into the U.S. market, according to the Wall Street Journal. https://www.zerohedge.com/markets/global-value-retailers-set-sights-us-consumers-are-desperate-lower-prices

Goldman is not jumping on the bounce train. Goldman's asset allocation strategists have the following things to say this morning:

1. remain defensive in our asset allocation into year-end. Remain UW equities for 3m horizon

2. "While sentiment and positioning is somewhat bearish we do not think we are at peak bearishness. Sentiment can stay bearish for a long time during bear market - a combination of extreme bearish sentiment, positioning and valuations provide a stronger bullish signal..."

3. "We think equity drawdown risk remains elevated into next year....."


https://saxostrats.podbean.com/e/spring-loaded-volatility-pent-up-by-150-in-usdjpy/ Today we look at rising US treasury yields continuing to drive brutal headwinds for risk assets, even if the price action in equity markets was fairly sedate. Meanwhile, the currency situation is extremely spring-loaded around the 150.00 level in USDJPY, which traders are eyeing with concern on the risk of enormous volatility should we trade above that level - which US yields adding energy to upside pressure in the background. Today features Technical Strategist and chartist Kim Cramer Larsson, who takes us through the technical situation in US equities, the US 10-year treasury yield, USDJPY and more. John J. Hardy hosts. And some nice charts here https://s356.podbean.com/pb/77461396923a615efa0be5a0b66a8bde/63510eef/data1/fs56/5709963/uploads/2022_10_20_MarketCall_Slides.pdf?pbss=735e5424-6a1e-5d83-a62e-4aefe2150429 Long-term USDJPY, QQQ etc


Swiss gold exports to China and India rise as prices fall http://reut.rs/3SchG9D


Inside £9 billion Battersea Power Station renovation http://dlvr.it/SbPXcD


Uniswap up following strong seeding round, while Bitcoin and Ethereum continue trading sideways http://dlvr.it/SbPXY3


If you think UK’s budget in unfunded, then what is this...yet no-one seems to ‘comment too much in the media’’

https://twitter.com/i/events/1583027380054024198 could be getting yet more news today then!


https://twitter.com/ValerieTytel/status/1582973176492933125 BOJ YCC break is a possibility you can’t ignore. JPY swap market reflects the desperation for a hedge. 10y swaps trade 30bps above the BOJ’s 25bp bond yield target - just as stretched as in mid June when US yields last topped

https://www.cnbc.com/2022/10/20/japanese-yen-hits-150-against-the-us-dollar.html?__source=sharebar|twitter&par=sharebar Japanese yen hits 150 against the U.S. dollar, weakest levels not seen since August 1990


https://www.macrodesiac.com/are-dutch-pension-funds-safe-or-next-to-fall/ Risk to the EU’s largest pension market is deemed manageable for now

https://twitter.com/davidbelle_/status/1582715705132470275?s=20 Pension funds have been urged to review their liquidity by the Dutch Central Bank!..


what a circus UK politics are, lost for words, these people are all party before politics, doing so much damage to folks, they should be sent away

The comparison to Italy is inescapable. Britain is hobbled by political instability, low growth and subordination to the bond markets. Welcome to Britaly https://econ.st/3gjCoqX


“US has just 106 million barrels of diesel stockpiles. Last time inventories were that low in mid-October was in 1951. Inventories should be 30% higher this time of the year.” Fed have another wave of energy-led inflation coming? https://bloomberg.com/opinion/art


NO, NO...! https://news.sky.com/story/uk-nuclear-warhead-maintenance-staff-to-vote-on-strikes-12724534 UK nuclear warhead maintenance staff to vote on strikes

https://www.ft.com/content/08908266-cc47-4cda-b8d4-97a8ac433a6d Quantifying Britain’s moron risk premium



https://www.ft.com/content/ddc13833-4724-447b-91f5-740b50c6c157 Real estate investors circle as property funds offload offices and warehouses

There is a gap between buyers and sellers on what constitutes fair value




https://twitter.com/Peston/status/1583004519721336833 Peston : Talking to member of the cabinet last night, it’s clear there is a collective will among ministers to try to keep Liz Truss in office till 31 October, so that the chancellor can determine which further taxes need to rise and what spending should be cut in that de facto budget,…


https://www.msn.com/en-us/money/other/netflix-to-start-charging-extra-monthly-fee-for-sharing-account-passwords/ar-AA13b2Hk Netflix has vowed to start cracking down on password-sharers who let others log in to their account.


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