11-8

Trade deal on is trade deal off, will tariffs be rolled back as China Insists, is there any clear answer, not at the moment. What I can say with some certainty is that the long treasuries, long gold trade, Short Risk continues to be unwound. Overnight Volume in treasuries 2x average long end 2.5 the average per Bloomberg. Both Belgium and French 10 year yields climbed back above zero for first time since mid-summer and the activity in JGB this week has been astounding, per Bloomberg “Wednesdays trading range in JGB has only been exceeded once in past three years”   negative yields  trending towards zero as the benchmark traded up to -.04%ish . All this adds up to is that the long bond trade has had a day or two of reckoning along with gold, which is down ~3.7% this week. JP Morgan says takes profit on 3 year shorts and Barclays says go long 5 year’s –per Bloomberg. This is what makes a market is it the end of Sell off or more losses to come?

U.S. 10 year yields Low print this week 1.66% high print 1.97% 30s 2.16% highs 2.44%., Bunds -.37 %lows   -.22% highs. It will be an attention getter if and when bund yields turn positive.

 Spoos down a touch as is Oil, Bonds euro, gold, copper, silver and Jpy. No theme as of yet but White house comments hitting wires sounding optimistic on a trade  deal as they try to pump Stocks higher on a Friday. Trade Hawk Navarro appears to be on Board for some type of tariff roll back to get deal done; he is the Ultra hawk of trade negotiations and could be the person that holds up deal. Light Economic Calendar today and a Bond market holiday on Monday, which means cash market, closed.

From IFR news:

The total annihilation global fixed income markets suffered yesterday, let alone that of the prior two months, should continue to weigh heavily and limit any upside. Many market participants, ourselves included, may still fret over the possibility of event risk blowing up somewhere in the world, be it with respect to the US/China trade dispute, Brexit, the stagnant European economy, or any number of other concerns. But so far there is little if any sign of material support for markets from this perspective.

Hence we continue to expect higher yields and by extension steeper curves.

The significantly cheaper valuations compared to the rest of Europe and significant carry offered by peripheral markets suggest they will be well supported. This said, one would expect that higher rate structures globally should weigh on peripheral markets, while Spanish bonds may also worry over this weekend’s elections, and BTPs may worry over increasingly wobbly debt dynamics after the European Commission further reduced its growth forecasts for Italy yesterday. For a further discussion of the latter, please see here nL8N27N89T.

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