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Oct 7, 20223 min read

Gold / UST market depth / Scholz on EZ bonds / VIX / All about wages in today's NFP




  • GOLD – let’s see how goes after NFP >>>> could HIGHER VOLS and ILLIQUID blond market lead to a break up ion Gold safe heaven ? particularly as we approach 4 to 4.5% in UST which is very most likely going to be the top ?

  • NFP – all about average earnings – any signs of them following JOLTS and markets should ‘like’ it (quite bizarre when markets look for bad data to push Eq higher, we are in one of those moments apparently..)

  • Gold ‘breaking’ up on charts (clearly needs confirmation after NFP..) perhaps with the view UST 10year yields can do/go to 4-4.25 again but that being the top, XAU might be on to something from here

  • OPEC+ move >>> the U.S and others are upset, in many ways, when you try to inflict a price cap on a commodity, the market usually finds a way to make you pay the ‘natural’ price

  • Germany's relief plan could trigger UK-style bond meltdown in Euro nations. German Chancellor Scholz last week announced package worth €200bn designed to help w/soaring energy prices, including gas price brake & a cut in sales tax for fuel

  • Fed must be 'singularly' focused on inflation, Mester says and Fed’s Waller Sees Additional Rate Hikes Into Early Next Year >>> overall message remains : it’s all about inflation

  • Belarus bans consumer price rises in bid to tame inflation >>>> inflation is now illegal..

  • JPY : Japan’s top currency diplomate Kanda : making various efforts so as not to face a limit to ammunition in FX interventions

  • Treasuries Liquidity Problem Exposes Fed to ‘Biggest Nightmare’. JPMorgan measure of Treasury-market depth continue to plunge >>> the UK’s issue the other day is the tip of the iceberg, and as we said should worry other countries in similar fiscal situation, so not surprising to read Scholz comments below and worries from the likes of JPM

 
Markets :

  • All about wage growth today, the actual number is quite irrelevant

  • Equity markets rallied hard earlier in week (short covering), pausing last couple of days ahead of NFP

  • Rates moved higher with relative ‘ease’ last few days, 10y say is 20bp higher, all petty much across markets, UK similarly etc >>> the main issue remain ‘liquidity’ or lack of, there is NO daily liquidity when mainstream large blocks of trades have to go through

  • USD similar price action, weaker earlier in week, slightly higher last couple of days, awaiting payrolls

  • Gold chart below

  • Crude is up about 15% over last year (in USD terms), nothing dramatic ? maybe not, depending on which currency you look it can be up as much as nearly 50% for importers, such as Japan, and still about 25% in China, or 35% in Korea

  • Electricity/gas prices slowly still heading lower in Europe

  • VIX – a cheap punt, but nonetheless, 50K of the March’2023 150 calls! Traded last few days, at 20cents, in fact the highest strike in there is 180

 

Germany's relief plan could trigger UK-style bond meltdown in Euro nations. German Chancellor Scholz last week announced package worth €200bn designed to help w/soaring energy prices, including gas price brake & a cut in sales tax for fuel. https://cnb.cx/3ekWK2i



Russia’s war in Ukraine has exposed the vulnerability of Europe’s fuel supplies. In Poland, some households are hoarding garbage to replace their coal.


Government bonds including Treasuries accounted for 60 per cent of inflows, up from 20 per cent in August


President Charles Evans joined the Illinois Chamber of Commerce for a moderated Q&A on the U.S. economy followed by an audience Q&A >>> rates like to peak 4.5% in Q1 2023


https://www.bbc.co.uk/news/business-63167922 Samsung warns of 32% hit to profits on chip slump


Amid concerns about its financial health, Switzerland’s most troubled lender has announced offers to repurchase debt securities totalling billions of dollars…..long way to go in reducing debt…


https://www.ft.com/content/c85e0afa-fdf4-499c-bb0d-6c106336ef0c Goldman Sachs pursues asset purchases in UK pensions fire sale

US bank’s asset management arm targets retirement schemes’ illiquid holdings…“We’re seeing discounts of 20 to 30 per cent for a high quality portfolio [of stakes in private equity funds],” said Gabriel Möllerberg, a managing director at Goldman Sachs Asset Management. “It’s absolutely an opportunity.”…of course it is!



VIX surge to 150 is day’s biggest options bet for ‘fear gauge.’ Trader pays $950,000 for 50,000 options wagering on VIX spike. Bet could be ‘cheap way to hedge’ against a market crash. https://bloomberg.com/news/articles/2022-10-06/vix-surge-to-150-is-day-s-biggest-options-bet-for-fear-gauge?sref=R17xFhjo




JPMorgan measure of Treasury-market depth continue to plunge - Bloomberg’s gauge of how far yields are from fair value rising


Jan. 6 panel to hold rescheduled hearing next Thursday https://trib.al/ZoAj6sZ








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