Fed turns Lacy Hunt cautious on bonds
October 13, 2020
–Quiet yesterday in rates as Nasdaq soared 2.6% in thin holiday trade. I had no idea indigenous peoples were so enthusiastic about high tech. Curve had a slightly flatter bias as the red pack was unch’d and golds were +1.125. There was almost no option trading in rates, although there was a buyer of 15k TYZ0 132.5p for 1 ref 138-28, with that strike somewhere around a 1.50% yield (vs late yesterday estimate of 76.4 bps in 10-yr). The large 3EH call spread vs put spread (9975/9987cs vs 9912/9900ps) traded 0.5 a total of 650 ref 9947.5 in EDH’24, bought the put spread.
–Hoisington’s latest quarterly note has the most consistently bullish analyst (for decades), Lacy Hunt, concerned that the Fed’s open monetization of the US deficit could end the bond bull market.
–Headline on Reuters: Reuters/Ipsos poll shows Biden lead over Trump growing in Wisconsin, Pennsylvania. I drove to Lake Geneva WI over the weekend. There are Trump signs everywhere and almost none for Biden, easily 100 to 1 ratio. I am sure that’s not representative of Milwaukee or Madison, but the polls may not be correct.
–Another somewhat positive headline: German economy may return to pre-crisis levels in early 2022: Finance Minister.
Followed by: ‘German banks should prepare for wave of insolvencies, says Bundesbank’. Both on Reuters. It doesn’t seem like both can be right.
–With the Turkish lira continuing its slide, Turkey is once again provoking Greece by planning exploration in waters off Kastellorizo. Economic disarray raising the odds of military conflict…
