Posted on by The Daily Shot Editor: Lev Borodovsky

Powell’s comments send Treasury yields higher

The Daily Shot: 01-Oct-24
• The United States
• The United Kingdom
• The Eurozone
• Europe
• Japan
• Asia-Pacific
• China
• Emerging Markets
• Cryptocurrency
• Commodities
• Energy
• Equities
• Credit
• Rates
• Global Developments
• Food for Thought

 

The United States

1. US financial conditions eased sharply in September, as the Fed delivered a jumbo rate cut.
 

 
However, Chair Powell struck a cautious note on the pace of additional rate cuts, …
 
Source: @economics   Read full article  
 
… sending Treasury yields higher.
 

 
Nonetheless, the market still expects over 70 bps of rate cuts before the end of the year.
 
Source: @TheTerminal, Bloomberg Finance L.P.  

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2. The Dallas Fed’s regional manufacturing index declined in September, but outlook has been rebounding.
 

 
• Orders:
 

 
• Capacity utilization:
 

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3. There has been a rise in auto loan delinquencies as lower income households face higher payments as a percentage of their deposits. (2 charts)
 
Source: Bank of America Institute  
 
Source: Bank of America Institute  
 
• US auto loan interest rates remain elevated .
 
Source: Bank of America Institute  

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4. Here is a look at the distribution of mortgage rates for outstanding loans.
 
Source: CoreLogic  
 
5. Apartment completions have accelerated this year, which, in theory, should exert downward pressure on rents, particularly in the high-end rental market.
 
Source: Redfin  
 
6. Depressed oil prices are expected to be a drag on core inflation.
 
Source: Goldman Sachs; @MikeZaccardi  

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The United Kingdom

1. Mortgage approvals surprised to the upside.
 

 
2. Home price appreciation has accelerated.
 

 
3. UK retail stores are now cutting prices.
 

 
4. The current account deficit was narrower than expected.
 

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The Eurozone

1. The euro-area CPI reports continue to show moderating inflation.
 
• Germany:
 

 
• Italy:
 

 
2. The euro is moving lower after the CPI reports.
 

 
Bund yields continue to drop.
 

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3. Italy’s industrial sales have been running well below 2023 levels.
 

 
4. Here is a look at households’ cash levels and other financial assets.
 
Source: Nomura Securities  

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Europe

1. Sweden’s retail sales were back above 2023 levels in August.
 

 
• Wage growth is moderating.
 

 
• Economists expect another 50 bps of Riksbank rate cuts this year.
 
Source: @TheTerminal, Bloomberg Finance L.P.  

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2. Poland’s factory activity has almost stabilized.
 
Source: S&P Global PMI  
 
3. Here is a look at EU first residence permits Issued by citizenship and reason.
 
Source: Eurostat   Read full article  

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Japan

1. The Tankan report showed stable sentiment among large manufacturing firms.
 

 
Source: The Japan Times   Read full article  
 
Non-manufacturing sentiment continues to improve.
 

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2. The unemployment rate declined in August, but the jobs-to-applicants ratio also fell.
 

 
3. Lower front-end Treasury yields would likely weigh on USD/JPY, more so than other currencies.
 
Source: Morgan Stanley Research  

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Asia-Pacific

1. South Korea’s industrial production strengthened in August.
 

 
• The trade surplus topped expectations.
 

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2. Taiwan’s economic activity has been strengthening.
 

 
However, the manufacturing PMI shows factory activity close to stalling in September.
 
Source: S&P Global PMI  

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3. Australia’s retail sales surprised to the upside.
 

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China

1. Stocks continue to surge and are now overbought.
 

 
But the rally could continue because it’s coming off very depressed levels, especially relative to US stocks.
 
Source: Deutsche Bank Research  

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2. China’s non-manufacturing activity growth is nearing a standstill.
 
– S&P Global PMI:
 

 
– Official PMI:
 

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3. Here is a look at trends in China’s debt levels and debt service ratios.
 
Source: Barclays Research  

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Emerging Markets

1. Let’s run through Asian PMI reports.
 
• ASEAN (a slowdown):
 
Source: S&P Global PMI  
 
• Indonesia (still contracting):
 
Source: S&P Global PMI  
 
• Malaysia (soft):
 
Source: S&P Global PMI  
 
• The Philippines (growth accelerating):
 
Source: S&P Global PMI  
 
• Thailand (stalling):
 
Source: S&P Global PMI  
 
• Vietnam (sudden contraction):
 
Source: S&P Global PMI  

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2. Thailand’s exports remain at record highs for this time of the year.
 

 
3. India’s eight core industries output suddenly contracted in August.
 

 
• Here is a look at India’s fiscal deficit (cumulative, year-to-date).
 

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4. Colombia’s central bank delivered its seventh rate cut in this cycle.
 

 
5. Next, we have some third-quarter performance data.
 
• Currencies:
 

 
• Bond yields:
 

 
• Equity ETFs:
 

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Cryptocurrency

1. The crypto market rebounded in September (despite negative seasonality) with XRP and Bitcoin outperforming top peers.
 
Source: FinViz  
 
• Here is the third-quarter performance.
 

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2. It’s been a while since bitcoin had such a strong September.
 
Source: @markets   Read full article  
 
• October is typically a strong month for crypto, although sentiment is mixed.
 
Source: Coinglass  
 
Source: CoinDesk   Read full article  

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3. The Crypto Fear & Greed Index briefly entered “greed” territory over the weekend before falling back to “neutral.”
 
Source: Alternative.me  
 
4. Crypto funds saw the third straight week of inflows led by Bitcoin and Ethereum-focused products. (2 charts)
 
Source: CoinShares   Read full article  
 
Source: CoinShares   Read full article  

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Commodities

1. Carbon credits trading activity has risen in the COVID era.
 
Source: The Economist   Read full article  
 
2. Here is the third-quarter performance data across key commodity markets.
 

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Energy

1. Crude oil risks are skewed to the downside, according to Goldman.
 
Source: Goldman Sachs; @MikeZaccardi  
 
2. China imports a lot of crude oil from Iran.
 
Source: @TheTerminal, Bloomberg Finance L.P.   Read full article  
 
3. Here is a look at shifts in US annual energy investment from 2019 to 2024.
 
Source: Semafor  

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Equities

1. The S&P 500 was up 5.5% in Q3 and 21% year-to-date, …
 

 
… hitting its 43rd record high of the year.
 

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2. The Nasdaq 100 is testing resistance.
 

 
3. VIX remains elevated and is holding support, …
 

 
… particularly notable as the S&P 500 continues to reach record highs.
 

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4. The S&P 500 often encounters some challenges in October but typically ends the month on a strong note.
 

 
Here is the market’s year-to-date performance relative to seasonal trends.
 
Source: @KevRGordon, @NDR_Research  

 
5. Next, let’s take a look at the quarterly performance attribution.
 
• S&P 500:
 

 
• S&P 600 (small caps):
 

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6. Here is a look at market valuations relative to the last ten years.
 

 
• This chart shows international valuations.
 
Source: Goldman Sachs; @MikeZaccardi  

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7. Finally, we have some performance data for Q3.
 
• Sectors:
 

 
• Equity factors:
 

 
• Macro basket pairs’ relative performance:
 

 
• Thematic ETFs:
 

 
• Largest US tech firms:
 

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Credit

1. Borrowing rates have tumbled.
 
Source: MRB Partners  
 
2. US non-financial corporate debt as a share of GDP returned to its pre-pandemic level of below 50%.
 
Source: Deutsche Bank Research  
 
3. Assets under management at US loan mutual funds and ETFs dipped in August, snapping nine months of consecutive growth
 
Source: PitchBook  
 
4. Here is a look at some performance data for Q3.
 

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Rates

1. Let’s begin with some attribution data for Treasury yields (August and Q3).
 

 
2. Treasury prices have risen for five consecutive months.
 

 
3. The 10-year Treasury yield is testing support …
 

 
… alongside stabilization in the copper/gold ratio and AUD/CAD.
 
Source: Damanick Dantes; Bloomberg  

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4. The Fed owns a large share of long-end Treasuries with roughly a third of the 10-year+ maturity stock.
 
Source: Deutsche Bank Research  
 
5. Mega-cap tech companies continue to reduce their holdings of Treasuries.
 
Source: Deutsche Bank Research  

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Global Developments

1. G7 government bonds appear overbought.
 
Source: MRB Partners  
 
2. Japan and South Korea have a greater share of the labor force working beyond 65 than global peers.
 
Source: Morgan Stanley Research  
 
3. Finally, we have some performance data for Q3.
 
• Currencies:
 

 
• Bond yields:
 

 
• Equity indices:
 

 
• USD-denominated equity ETFs:
 

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Food for Thought

1. Helene’s projected financial impact among the most expensive US storms:
 
Source: @climate   Read full article  
 
2. Growing number of voters identifying as independents:
 
Source: MUFG Securities  
 
3. Public and economists’ views on populist policy proposals:
 
Source: @WSJ   Read full article  
 
4. Global contraceptive methods usage by region in 2019:
 
Source: Statista  
 
5. States with the highest voter turnout:
 
Source: JeffBet  
 
6. Likelihood of unionizing among US tech workers by company:
 
Source: Visual Capitalist   Read full article  
 
7. Preferred dog food brands:
 
Source: @CivicScience  

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