Today's installment of his Marc to Market blog is of necessity, boring. Because the markets are boring.
Not that that's a bad thing.
He begins:
Markets Await Fresh Developments
Overview: Last week's bond market rally has stalled. Benchmark 10-year yields are up 1-3 bp in Europe, and the three bp increase in the US puts the yield slightly below 1.50%....
*****
And in the section on America
....The US 10-year Treasury yield fell 14 bp after initially edging higher after the FOMC meeting. It fell to almost 1.42%, its lowest level since late September, after the stronger than expected employment report. There are four things that most of the narratives seem to miss. First, the dramatic fall in US rates was more than matched in many foreign markets. That means the interest rate differentials moved in the US favor. The 10-year premium over Germany rose almost 8 bp. The premium over the UK rose 10 bp to the most in two months. Second, the fall in the bond yields can be fully explained by the adjustment in short-term rate expectations (a proxy for policy). The implied yield of the December 2022 Eurodollar futures fell almost 14 bp last week. The December 2022 short-sterling interest rate futures saw its implied rate collapse by 33 bp. Not to be left out, the December 2022 Euribor futures implied interest rate fell by 19 bp. Third, many of the observations shared in the press, and social media do not recognize market positioning. Speculators went into the FOMC meeting with their largest net short position since March 2020. Moreover, some of the shorts were in weak hands because the Commitment of Traders report shows that the bears added about 21.8k contracts to their gross short position, the biggest weekly increase in six months. The speculative position was net long as recently as early October. Fourth, the dollar value of negative-yielding bonds rose every day last week (the first time since July). It rose by almost 28% last week to $13.7 trillion. It appears to be the biggest increase in five years and makes the paltry US yield more attractive....
....MUCH MORE
The futures on the 10-year are at 131.53 -0.30; giving up around a third of the gains since we first commented on Thursday. Here's Friday's link if gentle reader wishes to work backwards.
Best guess for the action this week is treasuries settle higher [rates lower] by Friday, increasing the pressure on the speculators and setting up a spike as the commercials take the spec's money and then reversing.
Eventually, the dollar goes to zero amidst nuclear and biological war, the living will envy the dead, etc.
But not yet.
Tonight, tonight, We Dance!
