Morning 1-31

BOJ activity indicates that they are not quite ready to end QE. Per Mizuho, “overnight Japan’s 10-year bond yield briefly rose by more than 2bps above 0.10%, the highest since July 11, with traders commenting that any sustained increase in the 10-year yield to 0.1% would test speculation that the BOJ will offer to buy unlimited amount of bonds for fixed rates.
Well, the BOJ did not do that, but in a clear indication that the BOJ will not tolerate further upside pressure on JGB yields, as part of today’s “ribbon” or BOJ equivalent of POMO, the BOJ boosted bond purchases in the 3-5 year bucket from 300BN yen to 330BN yen. This was the first increase in this bucket since July, and follows a 10BN yen reduction in bond repurchases in the 10-25Y bucket on January 9, which spooked traders that the BOJ was sending its latest tapering signal.”

Economic Data out of Europe Saw EZ and French Cpi tick higher but German retail sales miss expectations. Euro has maintained a bid throughout the morning and trades higher by .4% vs dollar. Post BOJ news Yen has failed to gain any traction to upside and sits little changed vs dollar. After her first back-to-back to losses in over month Spoos are ticking higher along with most major stocks markets. DXY dollar index -.3% and not having much of an impact on Commodities. Oil is trading lower for 3 rd consecutive day as the uptrend is in serious doubt .Yesterday’s rumors of a Bearish API numbers came to fruition as Crude and gasoline both showed builds in weekly Inventory stats.CL -.6%,Brent -.5% gasoline -.7 and Nat Gas -4% as weather turn less cold. Copper +1%.Bitcoin steady after yesterdays Excitement due to an old story of some issues with The Crypto holding asset “teather

Fixed income firm overnight could be a case of Month End bids talked about endlessly and response to the increased Buying from BOJ keeping some hope Alive for some central bank to keep buying bonds. Keep an eye on the treasury refunding announcement at 7:30 as An Increase in issuance is expected in the short and long end of curve. What could rattle market would be an increase greater than $2B in 10’s and 30’s.Government has to start paying for the increased deficits. Yesterday’s trump Speech was short on actual policy but it was what he did not say that might have calmed market. He did not sound overly hawkish on trade and tariffs and wanted “fair” trade deals with our partners. Trump as any president would do talked up the economy and his accomplishments to date.

Today’s theme is one of Risk on in stocks. Data yesterday from China and japan provide evidence of a strong global economy . Boeing Earnings were better than expected thus pushing Dow +200 points pre cash open. Todays Fed meeting should lean hawkish but not so much to rattle bond markets. watch the Phrase “risks to outlook appear roughly balanced” as some are saying that roughly balanced could be tweaked and if so signal a more hawkish fed. Unlikely but something to monitor.

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