The 2yr yield is inverted to emphasize value rather than yield. The untethering of the DXY from the treasuries are something to watch.
There's a lot to see here. Im viewing it from the lenses of liquidity and solvency.
This is developing. The purpose of this post is to serve as a repository of notes along the way regarding this topic.
DXY shows relative strength of the dollar. But the bonds sell off seems to show it as contextually weak albeit stronger (and in this case the most liquid). I would view this more as a moment of underperforming by the least in a group of underperformers rather than outright comparative outperformance.
Notable Events since the 6/10 CPI print
See Further Comments for updates.
There's a lot to see here. Im viewing it from the lenses of liquidity and solvency.
This is developing. The purpose of this post is to serve as a repository of notes along the way regarding this topic.
DXY shows relative strength of the dollar. But the bonds sell off seems to show it as contextually weak albeit stronger (and in this case the most liquid). I would view this more as a moment of underperforming by the least in a group of underperformers rather than outright comparative outperformance.
Notable Events since the 6/10 CPI print
- Yield curve inversion along multiple points of the curve as the short end yields higher than the long end
- 75 bps being priced in, market wide, some stating as early as this Wednesday's announcement for June. Consensus give 95% probability for July. ~175bps being priced in with high probablility to september.
- WSJ piece by Timiraos re the coming hikes.
- Celsius (large cap crypto lender) becomes defacto insolvent during what looks like a bank run. Dollar withdrawals are suspended. www.washingtonpost.c...-withdrawals-freeze/
- Binance briefly halts dollar withdrawals from the BTC network. One of its networks briefly down due to a "stuck transaction" twitter.com/bin...337215877283840?s=20&t...
- ECB Fragmentation is popping up with increased frequency in the 10y sovereigns. Draghi's "whatever it takes" comments see the Italian 10yr sell off at a rate leading the euro area sell offs.
- In the beginnings of the overnight session South Korea warns "The financial markets and economy are in critical condition." President Yoon: " The government intends to use all supply-side tools to keep inflation under control" - Yonhap
- Meanwhile the BoJ amidst zero-bid scenarios on their 10y sovereigns and declares a backstop bid of 800bln yen at the next auction. The lack of liquidity in its bonds is causing havoc to the Yen. BoJ is expected to step in to defend the currency. This may have implications on its regional emerging market peers.
See Further Comments for updates.
Comment:
75BPS Hike Actual 6/15/2022
Statement:
www.federalreserve.g...netary20220615a1.pdf
Economic Projections: www.federalreserve.g...projtabl20220615.pdf
Statement:
www.federalreserve.g...netary20220615a1.pdf
Economic Projections: www.federalreserve.g...projtabl20220615.pdf
Comment:
External Ref: BoJ Policy Statement -0.1% base. will conduct purchases of 10Y JGBs at .25% every business day through fixed rate purchase operations.
www.boj.or.jp/en/ann...se_2022/k220617a.pdf
www.boj.or.jp/en/ann...se_2022/k220617a.pdf
Ambramowicz: "the universe of negative-yielding bonds becomes extinct" (twitter.com/lis...633873714618369?s=20&t...)
Meanwhile the BoJ continues its contrarian approach in an attempt to stymie the 'sell off' occurring in their sov debt markets. The BoJ provides bid for 2.2 trillion yen of bonds as traders seem to push JPY further in an attempt to see where the BoJs hand may be forced to intervene.
(www.bloomberg.com/ne...s-yields-keep-rising)