Read on the Trading Floor - 30 Oct 2023
Today’s focus… Treasury Issuance, BoJ Tweak, UAW get paid and much more
Macro Themes At Play
Theme 1 - Nikkei BoJ Surprise
Another story within 12-24hours of a meeting... Nikkei Asia - BOJ to tweak policy again to allow 10-year yields to exceed 1%. This has been a favourite BoJ trick under Gov Ueda, 3 of the 5 meetings have seen a pre-release test as outlined by Across The Spread by Weston Nakamura - BOJ Oct ‘23 Policy “Released” via Nikkei 12-hours Early (As Usual). Obviously, the focus is on their inflation forecasts, but will Japanese authorities look to time their policy adjustment in sync with a slowdown in US economic data, mirroring q4 2022 price action....
Previews of note...
MacroVisor - Could the Bank of Japan Surprise us?
LiveSquawk - Bets On A BoJ Policy Tweak Rise Ahead Of Announcement
ZeroHedge - BoJ Has Greater Capacity To Surprise Than Treasury Or Fed
Steno Research - Japan Watch: Markets are unprepared for BoJ action
Theme 2 - *US CUTS QUARTERLY BORROWING EST. TO $776B FROM $852B PREVIOUSLY
This week the focus is on the Treasuries plans with the borrowing estimate $76 billion lower than announced in July 2023 (Treasury Announces Marketable Borrowing Estimates). Today's announcement is a precursor to Wednesday's big news... Bloomberg - The Big Bond Market Event Wednesday Is at Treasury, Not the Fed
Finally ahead of the Fed, we've had Nick Timiraos publishing in the WSJ... Higher Bond Yields Could End the Fed’s Historic Rate Rises ... "Deutsche Bank estimate that with the run-up in yields since September, financial conditions have tightened enough to reduce economic activity by 0.6 percentage point over the next year, which the economists say is equal to roughly three interest-rate increases of a quarter-point each."
Theme 3 - UAW members get paid; will it encourage others?
Odd Lots - What Strikes in Hollywood Tell Us About the US Economy
Axios - GM is the last to reach a tentative contract agreement with the striking UAW
Theme 4 - Crescat Capital: Something More Has to Give
Take the time to read the excellent in-depth analysis Something More Has to Give by the Crescat Capital team...
Example extract... "The NY Fed’s own Probability of Recession Twelve Months Ahead model is forecasting a historically high probability of an economic contraction. As shown in the chart below, this indicator normally signals an impending violent downward repricing in the junk bond market which we believe could be directly ahead."
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Top Pieces
Further reading and listening of note from Harkster.com
JPM Asset Management - Notes on the Week Ahead: Slowdown Delayed; Cooldown Ahead of Schedule
Steno Research - EM by EM #27 Not a Bazooka, but a Pumpgun
Bloomberg - S&P 500: Morgan Stanley’s Wilson Sees Year-End Stock Rally as Unlikely
Oilprice.com - Oil Prices Plunge 3% as Market Weighs Israeli Attack on Gaza
Ashmore - China announced fiscal expansion as it seeks to control and re-balance local government debts
ING Rates Spark - We're now in a holding pattern
Adam Mancini - A Rare Green Day For SPX: Dead Cat Bounce or Bottom? Oct 31st Plan
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One might think Fetterman is the new Hitlary Clinton -- one who may not be questioned.