Thread by @MacroTechnicals

MT GLOBAL MARKETS Momentum Weekly Recap wk38 as of 20Sep19 - thread 1/n

• RiskOFF week
• CDS Indices due to roll
• REPO wut ?
• FED cut and still behind the curve
• US permits bounce
• ZEW bounce
• EU car registrations ugh!
• global exports ugh!
• Norges solo trip

>>

2/n global markets YTD as of wk38

3/n Global 10Y Govts bonds heatmap

strong rebound indeed after previous week bond massacre.

4/n global bond yields CB 2Y 10Y curve FX comp

• FED -25, Indonesia -25, PBoC -5, HKMA (pegged)
• Norges hiked 4th time, +25
• overall another bull-flattening theme
• Moody's downgraded HK outook to neg

5/n FX matrix

• JPY near top of the "leader board" in classic RiskOFF
• oil producer countries also on top as BRENT/WTI spiked
• dovish comments RBNZ RBA led to weakness in Aussie and Kiwi

6/n Momentum / Trend / Exhaustion scores as of wk38

• STOXX, CAC, TSE made new 52wk high
• NZD , HUF made new 52wk low (but exhaust signs)
• Greek 10Y yields made new 52wk new low

7/n let's move on to FED delivery ...

• 2nd cut as expected , eliminating 8th hike previous too hawkish cycle and closing part of the "behind the curve" gaps (FF futs, 2Y, etc)
• presser "organic balance sheet growth" + repo spook resulted in bond gains and curve flattening

8/n in the larger context, FED keep "mid-cycle-adjusting" but in fact, yieldcurve e.g. 2s5s is still inverted, pointing to ongoing economic slowdown. SPX is in a kinda consolidation box but also in (IMHO) late and stretched cycle. more stimuli expected tho

9/n at the moment we witness a temporary inverted REPO curve, inverted FF LIBOR SOFR impl yield futures and still the swap & bond "smile curve" (not really smiling). STIR & Bond Market clearly wants to see further easing and is concerned about growth outlook

10/n now, to the REPO thing... everyone is by now aware about that spike (maybe a one-off, tax/bond payments), but so far it continued and everyone keeps asking who is in trouble. IOER cut an extra cut and spread to FF upper target is now 20bp btw.

11/n here the Treasuries and MBS securities Repo spikes . Both cooled down and implied stock vola VIX was not rattled at this moment.

12/n perhaps more relevant would be LIBOR -OIS stress signals, and indeed 1M and 3M rising, but this is not new and been ongoing since a while. certainly to be on the radar, but it's still not at stress levels.

13/n JPM GS MS BAC etc 5YCDS spreads moved quite a bit, but tbh, they were all quite near complacency levels. To be watched, but so far not stressful territory.

14/n CDX IG moved sharply 10bp, but this is bit misleading as this was mostly due to Sep roll. Nevertheless, always important to monitor

15/n back to the REPO spook ...

NY FED announced possible strategies of "organic growth of the balance sheet" newyorkfed.org/medialibrary/m… ...

but this has not started yet...

16/n I am no REPO expert and while this spike is unusual and has to be monitored, there is a lot of misinformation and some guys are seriously adding DAILY REPOS (= the bank who needs OVERNIGHT funding is technically selling and RE-purchase the collateral back)

17/n $75b O/N + $75b next day O/N + $75b next day is not $225b, it's still only $75b... you can find the data here: apps.newyorkfed.org/markets/autora…

18/n this is why we see the $75b "increase" of balance sheet. It is NOT that the FED is buying / hold to maturity as in asset purchase program. At this point it is still only O/N or even term REPO ... it's collateral going back to the original holder with a haircut.

19/n anyways, back to markets: SPX is holding resistance while VIX COT specs positions show a relaxed (perhaps semi-complacent) attitude. One DJT tweet and it could be at new ATH. Nothing has rolled over here yet. It's sideways

20/n VIX plunged, curve normalised and back to contango.

21/n but keeping in mind, this time of the year is often accompanied with elevated risk premium... $VIX

22/n as seen also here with $SPX

23/n eco data: US housing permits increased ... which at this stage shouldn't surprise because unemployment rate is low at 3.7%, wages rising and mortgage rates falling...

24/n and $XHB homebuilder obviously perform on YoY basis

25/n existing home sales also came better than expected.

26/n EU is still not so rosy... car registrations still look dire... despite zero interest rates. unreal. and this has nothing to do with US tariff, China slowdown. That's EU domestic.

27/n German ZEW expectations rebound off extreme pessimism... but it's still negative, just less though... Yieldcurve has not rebounded.

28/n EU ZEW also rebounded (well, obviously same financial analysts who made Germany rebound)... and ECB trying to help on all fronts, cutting rates, tiering theme, QE coming... banks continued their small rebound.

29/n and then we had a few export data, some were okish, some continued to be deteriorating, so not out of the woods yet it seems.

30/n next week next batch of (flash) business confidence and ESI. If they don't know, who knows.

31/n and for the laugh of the week:

https://twitter.com/hey_ashiwel/status/1175398628120301568?s=21

32/end and that's it for now.

enjoy the rest of the Sunday x

@threadreaderapp unroll. thx