Thought For A Day
Archives of “March 2020” month
rssS&P 500 dividend yield exceeds 30y Treasury yield by the most in history.
Preparedness and response framework for novel influenza
What’s priced in for the Federal Reserve now?
We’re done with Fedspeak until the March 18 decision
The bond market has gone haywire today and with the VIX at 50, the market is begging for more help from the Fed.
Still, US stocks are only down 9% year-to-date so maybe the Fed will want to save some ammunition? We will see on March 18.
The final Fed comments before the blackout came from Rosengren, who was talking about more Fed asset and securities purchases beyond government-backed securities. So if we’re already talking about beyond the zero bound, maybe we will be there before long.
The Fed funds futures market is now pricing in 50 basis points of easing on March 18 and a 51% chance of a 75 bps cut. The 10-year inverted below T-bills today and well below Fed funds so it’s certainly on the table. That would leave rates at 0.25-0.50% and leave the Fed with only one traditional cut and that’s 65% priced in for Sept.
CFTC commitments of traders: EURUSD shorts are trimmed but still against the price trend this week
Forex futures positioning data for the week ending March 3, 2020
- EUR short 87K vs 114K short last week. Shorts decreased by 27K
- GBP long 35K vs 30K long last week. Longs increased by 5K
- JPY short 42K vs 56K short last week. Shorts decreased by 14k
- CHF short 3K vs 1K long last week. Shorts increased by 4K
- AUD short 52k vs 44K short last week. Shorts increased by 8K
- NZD short 17K vs 15K short last week. Shorts increased by 2K
- CAD long 11k vs 15K long last week. Longs increased by 4K
Highlights:
- The EUR remains the largest speculative position and it is still short, but there was a relatively large liquidation of 27K. The EURUSD bottomed on February 20. The price has been up 9 of the last 11 trading days. The squeeze higher seems to have led to some liquidation of the short positions. Traders are still offsides given the recent sharp move back higher.
- The JPY has been getting stronger as stocks and rates tumbled. The USDJPY is trading at the lowest level since August 27 (higher JPY). Speculative positions remain short JPY (long USD), and losing money. Like the EUR, the position has been trimmed but traders remain short the JPY (long the USD) and against the price trend this week.
- The AUD has moved higher off the low from last Friday. Speculative positions in the AUD saw an increase of 8K in the net short position. The short is losing against the rising value of the AUD this week.
- The speculative position in the GBP (Long 35K) is benefiting this week as the GBPUSD has marched higher last Friday’s low.
Late rally takes some of the sting away from the sharp declines today
Rate cut hopes into the weekend helps erase some of the declines on the day.
A late rally has taken some of the sting away from the sharp decline today in US stocks. The Dow industrial average was down close to 894 points an hour before the close. The index is still down around -250 points but well off those low levels.
The final numbers are showing:
- The S&P index -51.46 points or -1.7% at 2972.46. The index was down over -4% at its lows. So the late day rally erased a lot of those declines.
- The NASDAQ index is closing down -1.87% or 162.97 points at 8576.61. The low for the day reached 8375.13. The high reached 8612.359. At the low, the index was down -4.16%
- The Dow industrial average is closing down -255.69 points or -0.98% at 25865.59. The low price reached 25226.62. The high price extended to 25994.38. At the session low the Dow was down -894 points or -3.43%.
Thought For A Day
Rosengren: Fed should be able to buy broader range of assets if 10-year yields hit zero
Comments from the Fed’s Rosengren
Gold moving back toward unchanged area after plunge earlier
Volatile trading conditions in the precious metal
The price of gold is moving back toward unchanged after plunging earlier in the day. The price high for the day reached $1690. The price plunged near $58 from the high to a low price of $1642.73.
Since bottoming near the 38.2% retracement, the price has moved back higher and currently trades near unchanged levels at $1671.60 (down $-0.70 on the day).
Trump signs $7.88 emergency coronavirus bill
Trump puts pen to paper
The bill passed through Congress yesterday.
Comments from Trump at the signing ceremony:
- Says he doesn’t know if stimulus is needed (fiscal stimulus presumably)
- Says Fed should cut rates
- On coronavirus “we’re taking care of it”
According to Eamonn Javers of CNBC, President Trump just explained to the pool why he cancelled his CDC trip: “We may go – they thought there was a problem with CDC with somebody who had the virus,” he said, adding that the person in question has been tested and it is a negative test, “I may be going,” he added.
More from Javers: Asked by pool reporters if Congress needs to take more action to diminish risk of recession President Trump says: “all we can do is do what we do” “People were shocked” by jobs numbers, he said. He said he didn’t know if a stimulus was needed, per pool.