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    • Mar 14, 2023
    • 4 min read

Historical 2y bond moves / 'QE' back / JGB's / CS / FED next week, U.S CPI next / Credit is key


  • FED have now 'broken' a few things with their powerful hiking cycle, will they show signs of pausing/easing off on hiking.. (Crypto, coins, LDI, housing, commercial REIT's, leveraged/weak balance-sheets, VC space now etc), IMHO they still do 25bps, definitely not 50bps, but honestly anything goes..

  • Today is U.S CPI >>> Doubleline’s Gunlach: The Fed will hike next week in order to save their credibility but shouldn’t, Barclays no hike next week and Nomura goes for a cut next week and Fed to stop QT...anything goes, FED caught between a rock and a hard place (should still hike on Inflation vs financial conditions perhaps calling to stop or cut potentially..) >>> The events over the last three trading days is “expansionary” in monetary sense -ie, printinting money, likely stopping QT and Terminal rates were probably for this mini-cycle reached/Saxo-Steen

  • Moral hazard :... if you are/were a small financial institution/bank, you can/could take as much risk to boost your share price 15years, forget about hedging anything, if (when..) it goes wrong, they get a bailout... >>> all this goes all the way back to the LTCM days, the system should have never bailed them out...it allowed too many institutions to not care much about anything, as Central Banks and Governments would be here to bail them out eventually >>> the fastest rate hike cycle ever, is forcing the issue with too lightly/non-regulated, too concentrated businesses and weak/leverage balance-sheet balance-sheets

  • FT-How could regulators have missed the risks at Silicon Valley Bank? that IS the question..

  • Pfizer has agreed to pay USD 43 billion for biotech Seagen and its pioneering class of targeted cancer drugs, The Wall Street Journal reported

  • Credit Suisse said it had identified “material weaknesses” in its internal controls over financial reporting, the latest blow to a bank battling to revive its fortunes

  • A deal to restart Ukraine grain exports will be signed today. Ukraine, Russia, Turkey, and the UN have arrived to an agreement that will free up 20 million tons of grain trapped in Odessa

  • Quantitative easing apparently is re-accelerating: The BoJ revealed on Monday evening that it had stepped into the Tokyo equity market for the first time since early December 2022, buying $5.2bn worth of exchange traded funds

  • GS-Blankfein : A few banks may have issues like SVB, but only a few/thread below

 
Markets :

  • UST 2year yields down to 4%, a full 1% below last week's levels, just an incredibly HUGE rates move, broken every records, and not just in the U.S >>> Historic moves in the bond markets y'day, biggest decline in 2Y UST yields since 1982 (-60bps).... and the biggest decline in the 2Y German bond yields since 1990 (-40bps).... Swiss even bigger & wilder

  • GOLD naturally does well in these conditions, rates, QE, credit risks etc

  • Equity markets actually pretty stable, all things considered, few NASDAQ names liked lower rates yesterday, though internally, moves(swings were huge, depending on quality of names/balance-sheets/credit etc....as it should, it's not all good or all bad anymore...! Main indexes in the U.S stable, Europe readjusted 2% lower (was still near recent cycle highs)

  • BTC loved the Fed action (QE)

  • Stuff happening very fast these days, no queue outside forming at banks to take cash out, it's all done in few minutes/hours on the phone...on the back of a few tweets..

  • FX been remarkably stable really, a few crowded trade like long MXN, long CROSSJPY's and GBPCHF (briefly sub 1.10) came under pressure last few days. EURCHF down a little too, CHF, JPY and Gold always do well during these kind of periods.. Could the move in JGB's (now back to 28bps!), revive a little bit of a weaker JPY scenario (or...might be a perfect time for the BoJ to abandon YCC with JPN sovereign curve out to the 10yr trading comfortably below the 50bp cap... Specs short-squeezed (JGB's and JPY) after last week's meeting

  • Risk and equity rallied/held well, on lower rates/QE, but from here on, the real driver is and will remain credit, this is the most important thing in days, weeks and months ahead, it is all about CREDIT, like in 2009 period, equity do not necessarily need to go down big, but in credit and macro definitely ! so much more about specifics

 


Bank share sell-off spreads to Japan as SVB collapse shakes markets | Financial Times (ft.com) >>> The BoJ revealed on Monday evening that it had stepped into the Tokyo equity market for the first time since early December 2022, buying $5.2bn worth of exchange traded funds.


Collapse of Silicon Valley Bank, Signature Bank Calls Fed Interest Rate Path Into Question - WSJ >>> There is a saying that the Federal Reserve raises interest rates until something breaks. A big surprise over the past year had been that nothing broke. Things have broken now...


After all, the fact that SVB was sitting on a massive, unhedged portfolio of long-term Treasuries was no secret; last year, JPMorgan circulated shocking calculations to its clients (which were recirculated this week) that showed that these (then) unrealised losses could wipe out tier one capital.


If you can't cash in casino chips after gambling and go home then folks will stop going to the casino...


Credit Suisse finds ‘material weaknesses’ in financial reporting controls | Financial Times (ft.com) >>> In its annual report on Tuesday, Credit Suisse said “management did not design and maintain an effective risk assessment process to identify and analyse the risk of material misstatements in its financial statements” >>> CDS market a big spot of bother..


Couldn't make this up



Good news !


best stay calm and steady on spending










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