Macro Themes At Play
Theme 1 - 20bps profit rally?
The market has been waiting for 10s to trip 5% then whoooooff, like Eben Etzebeth steaming through the English pack, 10s have rallied ~20bps into the close. After reaching for 5% on a quiet day, the search for drivers commences...
Bill's tweet closing his short duration position?
Buyers strike ends... those waiting for 5% finally step in ...
Profit taking?
After a consensus view hit a popular tp level, a wave of demand arrives at the same time
or as per @Maverick_Equity tweet below... BofA have been signalling UST at technically over sold levels
... or was it just Bills tweet on a quiet day... is he that powerful?
The 2024 trend is still in place, rates will remain higher for longer, it will take a sustained downturn in US data in Q1 for the trend to reverse. However, after a one-way train, popular consensus calling for higher yields (WSJ), we were overdue a period of consolidation.
Theme 2 - ECB in focus... (extracted from The Morning Hark Oct 23)
Dull and easy? Is it ever thus with the ECB and no doubt a sources story will appear mid Thursday afternoon to put the cat among the pigeons. Anyway from the outside looking in it would seem one of the more straightforward meetings of the year. The ECB commentary has been fairly unified in the higher for longer mantra with the ECB in pause mode until such time as the data tells them otherwise. The landscape has changed in two key elements since the last ECB. We have seen the run up in global yields, in itself a tightening of policy. The other obviously is the Gaza conflict which has added to the uncertainty on the geopolitical front which is expected to have a dampening effect on the European growth outlook. On the flip side to that is the subsequent rally in oil which has put pressure on inflation and inflation expectations. A confusing picture and one that makes it more likely the ECB sits on its hands with a pause but keeps its options open for a December move with a slight tightening bias. December also gives them the advantage, if they do want to move, of another set of staff projections helping the ECB to join the dots for the markets.
Previews of note hitting our ECB channel...
FX:Macro [FREE] fx:macro Lite / 22.10.23
Pepperstone - Playbook For The October ECB Decision
Apollo Academy - Sticky Wages Keeping ECB Hawkish
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