Read on the Trading Floor - 11 April 2024
Today’s focus… PPI, weak auction, sabre rattling and much more
Macro Themes At Play
Theme 1 - 1bps > 0.2%
Theme 2 - ECB
Theme 3 - Israel / Iran
Further reading and listening of note
Theme 1 - 1bps > 0.2%
PPI was softer than expected at 0.2% but it was only a blip in the USD rally and/or fixed income sell off on the back of yesterday's CPI, which had JPow's "Supercore" at 0.7%. Higher commodity prices + lagged impact of red sea freight costs = elevated PPI = higher US yields? Steno Research "are especially scared of rising input costs spilling over to a cyclical re-acceleration of goods inflation into the spring at the worst possible timing for the Fed." Finally, we ended the day with another weak auction, the 30y tailing by 1bps... will we see a buyers strike in fixed income? Both Presidential candidates want to spend, grow the deficit and are extremely unlikely to raise taxes materially ... so the only thing left for the market to price is higher rates ...
ZeroHedge - Ugly 30Y Auction Tails For First Time Since November, Lowest Foreign Demand Of 2024
CreditNews - The hidden reason inflation is stuck
Reuters - Fed's Williams: Banks should be prepared to use discount window if needed
Brent Donnelly am/FX - Oops, I Did It Again
FT - Inflation report complicates Biden’s campaign messaging
Zero Hedge - The Case For Owning Treasuries Is Evaporating
Theme 2 - ECB
Holding pattern until they can cut in June. As we mentioned yesterday it was extremely unlikely that the ECB would cut today but at the same time there was limited risk of a hawkish surprise as the markets and boards softer growth and inflation expectations are aligned for a June cut. Nothing to move the needle with US fixed income dominating global proceedings.
Econostream - ECB’s Lagarde: If Disinflation Progresses, the Monetary Policy Stance Will Change
Rabobank - Hinting at a cut
BMO - ECB Hold 'Em
Theme 3 - Israel / Iran
Diplomatic channels are on overdrive as Biden sends his top regional General to Israel ahead of what could potentially be a devastating counter attack from Iran. Will they escalate, hit Israeli soil or will it be an "eye for an eye" strike, an Israel outpost. Expect the sabre rattling to continue into the weekend.
Steno Research - Israel-Iran War Coming?
Axios - U.S. aid official says famine has begun in northern Gaza
Axios - Senior U.S. general to visit Israel to coordinate on Iran attack threat
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Top Pieces
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Bloomberg - Robust Indian Economy Fuels Modi’s Electoral Juggernaut
Russell Clark - WHAT GOLD, REAL RATES AND GOLD MINERS ARE ALL TELLING YOU
FT - Tory election hopes fade with prospects for interest rate cuts
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SCMP - China’s low inflation set to be ‘long-term phenomenon’: 4 takeaways from March’s data
Macro Voices - Justin Huhn: Accelerated Demand Growth in Supply Driven Bull Market
FT - How Rishi Sunak built a close relationship with Blackstone’s bosses
NY Times - Gold Bar Sales Are Surging at Costco. Why?
Compounding Quality - Mastercard
Telegraph - Volkswagen electric car sales plunge as Europe returns to petrol
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