Aug 27, 2023·edited Aug 28, 2023Liked by Brent Donnelly
I’m arguing that the two largest foreign investors in American government debt, holding $2T of securities, are net sellers and your argument is that auctions have been solid. Ok…
Besides, I would expect auctions to be bid at these levels anyway for a technical bounce. I understand that inflection traders will be all over it too.
Aug 26, 2023·edited Aug 26, 2023Liked by Brent Donnelly
“1. Yields are topping out as explained above. Techs and fundamentals align, IMO.”
Fundamentals don’t align at all.
– There is massive supply coming into the market, also from the two main foreign buyers, China and Japan;
– Then there’s much larger than expected long bond issuance from the Treasury that should soak up the market with a supply imbalance for the rest of the year. Banks aren’t buyers, they’re sellers, and long positioning is tilted towards small speculators and funds;
– If that wasn’t enough, the Fed is doing QT and has no plans to stop it any time soon.
Good luck with that double top, which could easily draw a handle for a cup and rip higher. Extreme bearishness about China is there, but solid bearishness is also there if you remove the froth, and irrationality can last. I wouldn’t expect the PBOC to refrain from supporting its currency by selling USTs because some trader has a subscription of the Economist and knows how to use it.
(“Nothing in the cross-asset scan suggests China is much different now than it was a few months ago”: lags; you know all about that. And there is a lot in economic data that suggest otherwise.)
Yep fair if we take out the highs I reassess for sure. All the stuff you’re describing is more technical suplly demand to me and the end the economy matters more
Auctions are solid. There’s a bid. Time will tell of course, but suspect it’ll be a left field event, rather than supply concern( well known), that take yields through key levels - if at all.
I’m arguing that the two largest foreign investors in American government debt, holding $2T of securities, are net sellers and your argument is that auctions have been solid. Ok…
Besides, I would expect auctions to be bid at these levels anyway for a technical bounce. I understand that inflection traders will be all over it too.
Brilliant writing and analysis of the market as always. Thank you very much!
Thku !!!
“1. Yields are topping out as explained above. Techs and fundamentals align, IMO.”
Fundamentals don’t align at all.
– There is massive supply coming into the market, also from the two main foreign buyers, China and Japan;
– Then there’s much larger than expected long bond issuance from the Treasury that should soak up the market with a supply imbalance for the rest of the year. Banks aren’t buyers, they’re sellers, and long positioning is tilted towards small speculators and funds;
– If that wasn’t enough, the Fed is doing QT and has no plans to stop it any time soon.
Good luck with that double top, which could easily draw a handle for a cup and rip higher. Extreme bearishness about China is there, but solid bearishness is also there if you remove the froth, and irrationality can last. I wouldn’t expect the PBOC to refrain from supporting its currency by selling USTs because some trader has a subscription of the Economist and knows how to use it.
(“Nothing in the cross-asset scan suggests China is much different now than it was a few months ago”: lags; you know all about that. And there is a lot in economic data that suggest otherwise.)
Yep fair if we take out the highs I reassess for sure. All the stuff you’re describing is more technical suplly demand to me and the end the economy matters more
Auctions are solid. There’s a bid. Time will tell of course, but suspect it’ll be a left field event, rather than supply concern( well known), that take yields through key levels - if at all.
Thanks Paul
On Renaming Bonds: You did collect book suggestions on Twitter some time back, would be great if you could share them too, thanks very much!
Good call I’ll share in the next speedrun
No pressure but I’m super keen to know more there, thanks!