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Florian Kronawitter Profile picture
Florian Kronawitter
@fkronawitter1
Here to share what I've learned during 17 years on the frontlines of finance, the economy and markets
David Profile picture Mike Hargett Profile picture 2 subscribed
Oct 20, 2023 • 5 tweets • 1 min read
Some thoughts on Treasuries and TIPS:

The 30-Year Treasury ETF ($TLT) saw record trading volume yesterday, indicating forced liquidation which often occurs near a bottom (1/5)

However, after the Quarterly Refunding Announcement on August 2nd shocked markets, it seems unlikely that large buyers step in before the next one on Nov 1
(2/5)
Sep 26, 2023 • 5 tweets • 2 min read
On the history of real rates (1/3)

Historically, many lengthy periods where real rates where depressed for a long time

Typically involved war or disease

1984-2021 the second longest on record Image Their reversal usually lasted several years and involved considerable real rate rises (2/3) Image
Mar 10, 2023 • 5 tweets • 1 min read
1- 🇺🇸 Why the US regional bank issue extends beyond Silicon Valley bank

Regional banks pay 0%-1% on deposits while the FFR is 5%

Many are unprofitable if they were to pay "market" rates (!) on these deposits 2- SIVB throws this dissonance into the limelight

Customers now withdraw their deposits - why don't get paid *and* risk being stuck?
Feb 6, 2023 • 5 tweets • 2 min read
1 - #ConnectingTheDots The Bloomberg economist consensus for January is out

Expectations are for a "hot" month-on-month number, that annualises at ~5-6%

A significant step-up from recent prints 2 - What's the reason?

Simple - many fees, bills and contracts reset in January (example below)

Inflation was very high last year, so this seasonal effect should be very pronounced this year

Dec 15, 2022 • 5 tweets • 2 min read
1- #ConnectingTheDots The Fed meeting yesterday was hawkish, both the statement and Powell's press conference

The movement of FOMC members' dots - their view on high rates need to go - illustrates this well 2- This was contrary to my expectations, as "leaks" suggested ambiguity that the market would have read dovish
Dec 14, 2022 • 9 tweets • 3 min read
1- #ConnectingTheDots Markets & the economy

Let's start with the economy: There is an abundance of signs now pointing to a "hard landing"

Near term US Retail data tracks very poorly... 2- ...the European consumer is cutting back sharply...
Dec 5, 2022 • 9 tweets • 3 min read
1- #ConnectingTheDots On Friday, the US released employment numbers

Of particular note was strong wage growth for November, +0.6% m-o-m (>7% annualised)

US bond yields should have RALLIED on this highly inflationary signal, instead they FELL 2- Now, the wage data likely wasn't an error or outlier

As @jasonfurman highlights prior months saw upwards revisions, too
Nov 24, 2022 • 7 tweets • 3 min read
1- #ConnectingTheDots Commodities/Oil & Gas

We are currently in the ~4th inning of an economic slowdown 2- Many lead indicators point to significant contraction ahead

h/t @MichaelKantro
Nov 9, 2022 • 6 tweets • 3 min read
1- Thread on the US Debt Ceiling

The US has a constitutional limit on its indebtedness, currently set at $31.38bn

We are currently ~$200bn away from that, to likely hit the ceiling by early December 2- Janet Yellen has scheduled ~$500bn debt issuance between now and Dec 31st. So the ceiling needs to be increased

This requires approval by both Senate and House

Votes are still counted, but since yesterday Republicans likely are the House majority
Oct 31, 2022 • 5 tweets • 2 min read
1- The US Treasury issued its borrowing guidance for Q4

As in Q3, again higher, an increase of 37%, from $400bn to $550bn
home.treasury.gov/news/press-rel… 2- The 2023 outlook for government finances darkens quickly, for the following reasons

- Slowing economy and lower asset prices (cap gains tax)
- Higher interest rates
- Higher labor costs for gov staff

Oct 27, 2022 • 5 tweets • 2 min read
1- Checking in on the #Cyclical economy:

Inventories remain bloated and keep growing 2- So new orders continue to fall off a cliff

Chart from Richmond Fed survey - outlook 6 months from now
Sep 29, 2022 • 6 tweets • 2 min read
1- #ConnectingTheDots Checking on the US Consumer

Today we got Initial Jobless Claims, a lead datapoint for the evolution of Unemployment

They went DOWN 2- Near-term credit card data suggests spending HELD UP through September - no sign of any deceleration at all
Sep 28, 2022 • 7 tweets • 2 min read
1- #UK After their explosive move, gilt yields reached an unsustainable level 2- A 4-5% yield is simply too HIGH for both public (see chart) and private sector debt

Neither the government nor households will be able to pay these rates
Sep 23, 2022 • 6 tweets • 2 min read
1- If you follow me you know I am an “inflationista“ - nevertheless the following deflationary trends are worth highlighting today:

- Oil -6%
- US Nat Gas -4% (power)
- DXY +1.2% (cheaper imports)
- Wheat -3%
- 1yr inflation expectations -6.8%
- 2yr real rates at 2% (!) 2- Markets evolve around narrative, and a positive narrative could now emerge a la “the Fed medicine is WORKING“

This of course glosses over the fact that inflation is deeply tied to labor market imbalances - savings eg from lower gasoline prices are then spent elsewhere
Sep 22, 2022 • 6 tweets • 3 min read
1- I see a lot of takes that equity sentiment is at levels that historically lead to sharp RALLIES

Indeed, everyone is MEGA bearish and no one wants to buy stocks, expecting them to fall FURTHER - great conditions for a chasing rally

2- However, unlikely the 2009 or 2020 lows, this is not an equity story. It is an FX and BOND MARKET story

US Treasuries are in freefall as the STRONG DOLLAR kills foreign demand (30% holders) and QT limits Fed participation (25% holder)

Meanwhile, treasury issuance is UP
Sep 20, 2022 • 4 tweets • 2 min read
1- #German Producer Price Inflation came as a shocker number this morning (+7.9% m-o-m vs 2.4% est., +45.8% y-o-y) ⚠️

This is a HUGE challenge for its global competitive position. The US, China and Japan are on DIFFERENT trajectories Image 2- NB: August was the PEAK in Gas and Power prices. So for September, this number likely comes DOWN

However, it likely remains in uncomfortable territory, as many companies HEDGE their energy exposure

There, higher gas/power prices only hit once these hedge roll off Image
Aug 25, 2022 • 10 tweets • 4 min read
1- #ConnectingTheDots Checking in on #Housing following recent data

Question 1: What will happen to HOUSE PRICES?

Let's keep things simple - there is a RECORD number of houses under construction... Image 2- ...the SUPPLY of new homes is near a RECORD... Image
Aug 24, 2022 • 4 tweets • 2 min read
1- #ConnectingTheDots Lots of focus on what the Fed will do next, and whether inflation comes down

That is the WRONG debate

Yes, inflation has PEAKED. Yes, it will come DOWN

But why is the 10-Year is UP, despite declining inflation expectations? 2- Industrial data is CRATERING - Yesterday's US Composite PMI at 45, fastest contraction in 13 years

Yet, COMMODITIES and OIL trend UP

If US PMIs are at 45 and Oil is at 95 $/bbl, where will Oil be when the cycle turns UP again?
Jul 20, 2022 • 4 tweets • 2 min read
1- Two more #Housing datapoints out today. June home sales much below expectations with 5.12m vs 5.35m consensus 2- And mortgage demand, which leads home sales, at lowest level in 22 years cnbc.com/2022/06/08/mor…
Jul 18, 2022 • 12 tweets • 4 min read
1- #Germany #Ukraine Germany has made huge strategic mistakes, some explainable, some much less so, like advancing Nord Stream 2 in 2015, when the Donbass was already at war and Putin had shot down a passenger plane bbc.co.uk/news/world-eur… 2- As a fellow German myself, I know that - true to prejudice - we are good at order and precision. This explains good German engineering. The flipside is an inflexible mind. This makes us vulnerable to dogmas

Two dogmas need to die in Germany’s energy crisis
Jul 15, 2022 • 5 tweets • 2 min read
1- #Connectingthedots Today the NY Fed survey came out, which surveys local manufacturing businesses. The headline number, which is based on *current* view, looks benign. So "all is good"? Image 2- That's the lazy view - there is plenty more detail! Businesses are also asked about their views 6 months from now, and that outlook is dire:

New Orders on a mult-year low indicate very weak business going forward: Image