Make of it what you will horizontal Line ~ Zero,Red vertical area recession. remember Curve steepens into and during a recession
Plenty of Buzz regarding this number this morning as it shows a massive jump in the Number of unemployed people in May.But fear not German Economy not collapsing it is some type of Reclassification of workers that caused the Jump shown on graph below.
Trend in bonds lower as the Possibility of full out trade war and thus worldwide recession trends Higher. U.S. 3M 10 year spread touched -12.94 Multi year low, some use this is a recession indicator
Bond yields worldwide continue to drop to multi month lows as the “smart Money” expecting a global slowdown and inflation unlikely to reach targets set out by leading central banks. Bloomberg saying that 10-year yields in New Zealand and Australia touched record lows an Japan touched 3-year lows this morning.
10 year Yield changes over last Month in basis points (bps):
Spain -26 ,Portugal -25 Germany -17, UK -25, U.S. -30, Canada -16, Australia -31
Bloomberg talking about U.S. 10 year yields at 2% lets slow the roll a bit a here 10s at 2.22% going to take some actual “Facts” I believe to get yields down to that level. Today’s trade sees 30 year yields down 4 bps trading at 2.66%, down 20 bps over last 5 trading days probabilities for rate cut at December meeting 86% September meeting 58% ! To me this seems a bit aggressive pricing as Economic data has not been a disaster and fed speak continues to utter patience. It appears everybody leaning one way and adding to this position. Out of Europe ECb issued a warning that “if trade tensions escalate that it may well lead to a sharp fall in asset prices” Highlighting banks as an area of concern –Reuters. European banks are always a concern aren’t they Stoxx 600 bank index -1.5% nowhere near worst performing sector overnight, basic resources -2.4%, Oil and gas -2%
Oil & base metals taking it on the chin as Thoughts of Global slowdown gain traction Copper -1%,iron ore in China -2.5%,WTI -3%,Brent -2.7% Gold +.4% The exact opposite in grain complex as Planting progress for corn is now at slowest pace ever ! Corn up another 3.7% overnight, +10% last 5 trading days. Soybean planting also well behind historical pace and plenty of shorts to squeeze Soy +3.7% and Wheat +2.2% overnight. Grain trading heating up.
- Economic calendar and Fed speak light again today.
- The fight over rare Earth minerals picking up speed as China Likely to use this as weapon in trade war be aware that headlines of limiting export or outright banning exports to USA is a big deal.
First plenty of questions of why the Cl/Brent spread collapsed to one year lows, A few thoughts the story of pipeline down between Cushing and wood river ,Il. Monday A holiday and Lightly traded CL Whereas Brent more of a normal type day,A bit of pressure as price dropped below YTD lows. below is a graph of generic 1 month cal spreads for both CL and Brent,by looking at this graph not much of a surprise to see that Cl/Brent spread continues to trade wider. Brent roll a bit stronger=Supply worries and CL front roll a bit weaker=too much supply.
Dalian Soymeal futures ,very few down days so far this month
So far today Corn +3.34% every new high=new contract high, Soybean +3%,Soymeal +4.1% hard wheat 4% & and Soft CBOT wheat +3%
Consumer Confidence beat Expectations by 1 standard deviation as Job metric of plentiful/hard to get jobs getting back on trend . Soft data does not have a lasting impact on markets.
One of the two Auctions today the two year showed highest demand , as measured by bid to cover in ~10 months. This demand lifted all sections of Yield curve. Lets see if buyers show up at five year auction at Noon to further provide a bid in complex.
From market watch “Bitcoin , the cryptocurrency holds the title of one of the best-performing assets of 2019, up 140% year to date and up 70% in May alone. (Note, fellow cryptocurrency Litecoin (LTCUSD) is up 286% in 2019 so far).
Stocks and risk Soft today as Worldwide and U.S. markets try to get back in harmony after memorial day holiday, EU elections haven’t changed things too much, In U.K, parliament is to divided to get on with Brexit regardless who will become the Next prime Minister. The standoff between Italy and EU officials not ending soon as “EU officials considering proposing a disciplinary procedure for Italy next week over its failure to rein in debt “- BB. BTPs -50 ticks but off session lows. Dax and, US stocks little Changed, Shanghai Closed, +.6%.
Bonds and bunds on the other hand trading much higher than one would predict with Risk steady. Bund yields new YTD lows of -.14% ,lowest since late 2016.US 5s,10s and 30s all new YTD low yields and lowest since late 2017(5,10 and 30s) A bit of momentum play as yields broke below 2018 lows as forced buyers ? Have stepped in. A double auction today 2s at 10:30 and 5s at noon. No clear breakthroughs in US China trade talks over weekend in fact president trump said the”U.S. not ready to do A deal “, the end of the June G20 gathering appears to be the day when we could find out whether a deal is close to be completed or out of reach.
Dollar steady to higher, Crude oil and Brent out of sorts a bit, yesterday’s Brent Front month Cal spread closed at contract highs as supply worries and expiration propel that spread higher.. Gold -$5, and Silver -1.5%. Back on the Boil as Bloomberg headlines speaks of Corn +2.35% as rain continues to fall, Soybeans +1.5% and Wheat +3.6% From Allendale ,Inc. “Grain markets jumped higher again as strong, weekend storms continued to pour heavy rains across a large part of the U.S. growing region and threatens to slow an already delayed planting season. Above-normal rainfall is expected across most of the Midwest and Plains farm belt over the next 15 days, further delaying planting of corn and soybeans and potentially damaging the quality of the developing winter wheat crop, forecasters said.
9:00 Consumer confidence