Greetings, United States: US consumers continue to cut back on their credit card balances. Revolving credit is down almost 12% from the same time last year – a record drop. Eurozone: Market-based inflation expectations for the US and euro-area have diverged in recent months. Energy: The attack on Saudi oil facilities sent …
The Daily Shot Brief – March 5th, 2021
Greetings, Rates: Jerome Powell’s comments on Thursday were dovish as usual. However, traders wanted to hear about how the Fed may address rising bond yields. In particular, there has been talk about the central bank shifting its bond purchases to longer maturities. The market didn’t get its wish, sending bond yields higher. The market …
The Daily Shot Brief – March 4th, 2021
Greetings, The United States: Here is the ISM price index vs. the core PCE inflation. The 5-year breakeven rate (market-based inflation expectations) hit the highest level in over a decade. United Kingdom: The UK GDP continues to lag peers. Commodities: US steel prices keep climbing. Equities: We have some equity factor …
The Daily Shot Brief – March 3rd, 2021
Greetings, Equities: The stock market is vulnerable to an increase in real rates as the S&P 500 – TIPS yield correlation moves further into negative territory. Credit: Loan loss provisions among large US banks are below pre-crisis levels but are still high as a percent of total loans. This means banks have extra …
The Daily Shot Brief – March 2nd, 2021
Greetings, United States: The ISM Manufacturing PMI report topped market forecasts, showing US factory activity accelerating in February. The report points to further gains in the nation’s industrial production. Eurozone: As deposits swell, German lenders are starting to charge customers for holding money at the bank. Europe: What is the effect of …
The Daily Shot Brief – March 1st, 2021
Greetings, United States: Personal incomes rose sharply in January, boosted by one-time government checks and elevated unemployment payments (2 charts). The savings rate jumped. Eurozone: Will the ECB allow yield curve steepening that occurred in the US? Emerging Markets: Higher soybean prices should help Argentina’s recovery. Cryptocurrencies: Robinhood now has millions …
The Daily Shot Brief – February 26th, 2021
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, …
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The Daily Shot Brief – February 25th, 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: …
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The Daily Shot Brief – February 24th, 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 …
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The Daily Shot Brief – February 23rd, 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”
