Greetings, Rates: With longer-term rates rising, mortgage refinancing is expected to slow down, extending the duration of MBS securities. Holders of MBS (who are short convexity) found themselves increasingly long duration and were forced to hedge their exposure (often happens when rates rise suddenly). The hedging processes, which is usually done via rate swaps, …
Continue reading “The Daily Shot Brief – February 26th, 2021”
Greetings, United States: As Treasury yields climb, a rise in the 30-year mortgage rate could weigh on housing activity. Loan applications to purchase a home declined last week. Eurozone: Economic expectations are rebounding, which could benefit EUR/USD. Commodities: Industrial metals keep climbing. Here’s US copper (highest since 2011): Steel futures in China: …
Continue reading “The Daily Shot Brief – February 25th, 2021”
Greetings, China: Hong Kong announced an increase in stamp duty on stock trades, sending shares sharply lower. Emerging Markets: Here is the EM inflation cycle: Commodities: Many countries are trying to reduce their dependence on China for rare earths. Equities: Jerome Powell reassured the markets that QE would continue for some …
Continue reading “The Daily Shot Brief – February 24th, 2021”
Greetings, Equities: The reflation trade has accelerated. Credit: Here is an overview of fixed-income asset volatility, yield, duration, and yield per unit of volatility. Rates: While the Treasury curve keeps steepening, it is not as steep as growth indicators would imply. Real rates rather than inflation expectations drove the most recent …
Continue reading “The Daily Shot Brief – February 23rd, 2021”
Greetings, Rates: The global bond rout is picking up momentum. Most bond yields are still below 2019 levels but are rising quickly. The US: Japan: The euro 10yr swap rate moved into positive territory for the first time since April. Credit: Higher inflation tends to be helpful for leveraged companies (pushing up prices …
Continue reading “The Daily Shot Brief – February 22nd, 2021”
Greetings, United States: Jobless claims remain elevated with no signs of tapering. Eurozone: Euro-area consumer confidence remains soft, … … which may be a drag on retail sales. Energy: Natural gas prices in the Houston ship channel hit new highs due to disruptions. Equities: Short interest has declined throughout the US …
Continue reading “The Daily Shot Brief – February 19th, 2021”
Greetings, United States: The FOMC minutes show that the central bank remains dovish despite signs of stronger growth and higher inflation. The market now expects liftoff in 2023 … … as Treasury yields climb. United Kingdom: The rapid pace of vaccinations in the UK gave the pound a lift. China: The CSI 300 stock …
Continue reading “The Daily Shot Brief – February 18th, 2021”
Greetings, Eurozone: Brexit has forced a rerouting of trade routes between Ireland and the continent (see comment from the FT). China: Mortgage rates have been drifting lower, and the overall mortgage market expansion has been slowing Emerging Markets: Current account balances are in much better shape than they were during taper-tantrum in …
Continue reading “The Daily Shot Brief – February 17th, 2021”
Greetings, Energy: Frigid weather in parts of the US has been straining the nation’s energy infrastructure. Electricity prices in Texas spiked amid natural gas shortages and windmill problems. Equities: S&P 500 earnings are already above the pre-pandemic high, and Goldman expects significant growth this year. Eurozone: The euro-area trade surplus hit a …
Continue reading “The Daily Shot Brief – February 16th, 2021”
Greetings, United Kingdom: This chart shows the divergence between EU and UK in-store clothing retail activity. The public mostly approves of the government’s vaccine rollout. Europe: Here are European importers and exporters of electricity. Japan: The Nikkei breached 30k for the first time in decades. Commodities: Platinum is soaring. …
Continue reading “The Daily Shot Brief – February 15th, 2021”
