Morning 8-28

  • All time Low U.S. 30 year yields below 1.9%
  • All-time Lows Italian 10 year yields trading below 1.0%, near all-time lows in Italian 30 year yields. Both these maturities see yields drop by 30+ bps since Monday; it appears no new elections to be called thus political worries subsiding. A few people on Bloomberg discussing the Possibility of 10  year Italian yields moving below Zero if the ECB engages in a new round of Bond buying. Crazy times
  • Boris Johnson asking the Queen to suspend parliament thus Increasing the chances of a hard Brexit as MPs will not have enough time to debate hard Brexit GBP -.7%
  • Google moving production of Pixel Smartphone to Vietnam from China (BBG)

Lackluster trade theme again with ample mentions of illiquid market conditions, Yields Lower US and Europe Spoos steady to lower European tech companies as a sector -2% Dax and Cac -1%. Oil, Cl +1.5% as API reported a larger than expected draw in Oil stocks of 11 Million barrels. Silver on the bid again +1.3% she is + $1 over last 4 trading session a very impressive run.

No Economic reports today, A few Trump tweets this morning having very little impact on trade.remeber that September 1st is the deadline for the new round of China tariffs

Commentary from IFR:

“Another day, another sharp curve flattening. The flattening is being led by a runaway 30-year that after flattening to the rest of the curve by roughly 3 bps yesterday has put in an encore performance in the overnight of a similar magnitude.

The move is seen as being motivated mainly by technical factors if increasingly by fundamental factors as well. The technical factors are centered on global sovereign supply/demand influences for both yield and duration. These considerations have been in force for months (if not longer) and mainly driven by global central bank policies of negative interest rates and large scale assets prices that have deprived the global sovereign markets of both yield and supply.

The process is an insidious one as it takes time to percolate through the system if eventually it hits a tipping point where the patience of global bond portfolio managers and pension funds etc. wears thin and they too succumb to the race to grab yield/duration before it all evaporates.”

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