Archives of “January 2021” month

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Bank of Japan monetary policy meeting ‘Summary of Opinions’ of the January meeting

  
Analysis, Economy

The minutes of this meeting will be out in around 7.5 weeks (March 24), the summary is a good guide to what was discusses.

The Bank remained on hold at this meeting, with a policy review due in March.
Headlines via Reuters
  • BoJ must strengthen easing stance as risk of deflation has heightened further
  • One board member said the Bank should consider anew the cumulative effects of easy policy on matters such as financial intermediation, market functioning.
  • must consider how to balance the effects and side-effects of its policy

Robinhood update – draws credit lines, bolsters liquidity

  
  Analysis

An in summary update of where Robinhood is at.

  • the firm has drawn on credit lines in amounts said to be ‘hundreds of millions of $” by media reports
  • lenders to the company include banks like JPMorgan & Goldman Sachs
  • the firm has raised margins on trades
The causation runs:

 

  • Stock-trading clients of  Robinhood clients take on margin deb
  • Robinhood lends clients the cash to do this and, in turn, has drawn on credit to front the cash
  • the risk to the ‘Hood is if the stocks fall hard client margin debt may not get paid back
  • RobinHood moved to control this risk both by placing curbs on trades and drawingon credit lines.

US 10-year yields reject the break of 1%

  
  Analysis
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Yields quickly move back higher

Yields quickly move back higher
The chart of 10-year yields is an interesting one. There was the consolidation pattern at the top that broke down this week but now it has rejected the first test of 1% and bounced 6 bps to 1.06%.
It’s now testing the bottom of the old range and we’ll soon find out of there will be a broader range of consolidation or it will range from 1.00%-1.06%.
Notably, the bond market was a step ahead of stocks this week and that break lower came well ahead of the rout in equities yesterday. There has been a great pass-through to FX, but keep an eye on yields from here.

US dollar extends the decline as risk trades continue to march higher

  
Analysis, Forex

Fresh highs in the antipodeans and cable

This is turning into quite a day in the stock market as the S&P 500 rallies 80 points, or 2.1% in the best day of the year. The dip has been bought and yesterday’s huge decline is now nearly wiped out.
The banning of trading in meme stocks was the greenlight for ‘situation normal’ in markets and ‘situation normal’ means ‘buy the dips’.
It’s also a big unwind of the outside moves in currencies yesterday. The commodity currencies have now taken a bit bite out of yesterday’s losses and cable has completed the round trip. The move is extending as I write and AUD/USD.
Fresh highs in the antipodeans and cable

There might be a bit of resistance at 0.7700 in the short term.

Dollar continues to hold slightly firmer, risk showing some hints of calming down

  
Analysis, Forex

The risk rout calms down ahead of North American trading

The greenback continues to lead the charge in the major currencies space but gains have been trimmed somewhat across the board as risk sentiment exudes some calmer tones.
The DAX fell by nearly 2% earlier in the session but has trimmed losses well beyond opening levels to be down by just 0.6% currently. Elsewhere, S&P 500 futures are down by 0.2% after briefly turning flat as compared to the roughly 1% drop earlier.
Of note, even the pickup in the VIX yesterday is starting to abate a little but it may still be too early to draw much conclusions until Wall Street enters the fray later.

 

VIX
The overall risk mood remains fragile still following the battering yesterday and while there are some calmer tones now, it may yet turn chaotic once again later in the day.
As for the dollar, it is mostly reacting to how risk sentiment is playing out over the past few sessions so expect more of the same ahead of the weekend.
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