Shunning bonds
September 14, 2023
–Yields edged lower as the brief sell off after the inflation report was absorbed. CPI 3.7 vs 3.6 expected, Core 4.3, as forecast. Tens fell 1.7 bps to 4.245%. SOFR contracts up 2 to 3 from U4 back. Vol a bit lower in the wake of CPI. TYZ3 110^ 2’35 from 2’40 on Tuesday.
–Today brings Retail Sales, expected 0.1 m/m vs 0.7 last. Ex-auto/gas expected -0.1 vs +1.0 last. PPI 1.3 yoy vs 0.8 last; ex-food and energy 2.2 vs 2.4 last. Jobless Claims 225k.
–Thirty year bond auction tailed by about 1 bp, going off at 4.345%. Bloomberg headline this morning: ‘Ray Dalio says he doesn’t want to hold bonds, cash “is good”. From the article, “We’re seeing that dynamic happen now [central banks may have to step in]”, Dalio said. “I personally believe that the bonds, longer term, are not a good investment.” Pimco’s Ivascyn also said yesterday that debt levels and deficits are a concern, and that he has added to positions in inflation-linked bonds. While countless observers have warned about unsustainable debt metrics, I get the feeling that these subtle warnings from huge stewards of capital carry more weight.
