Surrealistic Bond Pill-ow?
What precipitated today's bond rout?
Tuesday record $26B corp issuance...
Wen two day corp issuance total $56B...
MSM sez Fed wrapping up another 25bps of candied cut crack?
Plunging yields suddenly turn into bond rout...
At the bottom of the hole...
Remember what The Dormouse whispered?
look at what Fwd USD vs EUR/CHF/JPY in TN and SN did?
on average forwards TN -1.60 and SN +1.60 which are large near term moves.
Now look further out at what the USD forward rates did vs JPY/CHF/EUR.
Mostly in the red or down.
Another Fed 25bps cut
= lower US rate
= narrower USD rate differential vs low and negative foreign rates
= lower forward USD rate
= lower yield pickup on FX hedges when rolled forward
= squeeze on fx hedged bond carry + record corporate issuance
= lower demand and a sell off
FYI: ON: Overnight - between today and tomorrow (T+0 to T+1)
TN: Tomorrow next - between tomorrow and next day (T+1 to T+2)
SN: Spot next - day after next day (T+3)
SW: Spot week (T+7)
and now some Airplane with Grace...
Take the red pill and follow me down this rabbit hole...— The Nattering Naybob (@NaybobNattering) September 5, 2019
Tuesday record $26B corp issuance... https://t.co/qXeeGNcHfE
— The Nattering Naybob (@NaybobNattering) September 5, 2019
— The Nattering Naybob (@NaybobNattering) September 5, 2019
The Dormouse whispered.... look at what Forward USD vs EUR/CHF/JPY in TN (tom-next) and SN (spot-next) did? https://t.co/cF6GUNOQF9— The Nattering Naybob (@NaybobNattering) September 5, 2019
— The Nattering Naybob (@NaybobNattering) September 5, 2019Recap of our trip down the hole...
Tuesday record $26B corp issuance...
Wen two day corp issuance total $56B...
MSM sez Fed wrapping up another 25bps of candied cut crack?
Plunging yields suddenly turn into bond rout...
At the bottom of the hole...
Remember what The Dormouse whispered?
look at what Fwd USD vs EUR/CHF/JPY in TN and SN did?
on average forwards TN -1.60 and SN +1.60 which are large near term moves.
Now look further out at what the USD forward rates did vs JPY/CHF/EUR.
Mostly in the red or down.
Another Fed 25bps cut
= lower US rate
= narrower USD rate differential vs low and negative foreign rates
= lower forward USD rate
= lower yield pickup on FX hedges when rolled forward
= squeeze on fx hedged bond carry + record corporate issuance
= lower demand and a sell off
FYI: ON: Overnight - between today and tomorrow (T+0 to T+1)
TN: Tomorrow next - between tomorrow and next day (T+1 to T+2)
SN: Spot next - day after next day (T+3)
SW: Spot week (T+7)
and now some Airplane with Grace...
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