Financial Occultist

Stoxx 600 -2.4%
UK FTSE 100 -1.5%
German DAX -2.5%
French CAC -2.6%
Italy MIB -2.8%
Spain IBEX -2.4%

It’s been a rough couple days but the DAX still has some breathing room above the May and March lows.

10-year JGB yields holding above BOJ’s implied cap in late Tokyo session

JP10Y

10-year JGB yields are creeping up above the 0.25% mark to 0.255% and is holding there with 30 mins left until the cash market close in Tokyo. As a reminder, the BOJ has an implied cap for yields at 0.25%.

They already have unlimited offers to bid 10-year JGBs at yield of 0.25% but have now announced that they will also be buying up the belly of the curve tomorrow.

The central bank says that it will conduct an additional set of purchases of ¥500 billion on notes with maturity of more than 5 years and up to 10 years.

This will be a key area to watch in the week ahead to see how much the BOJ will throw to keep its yield curve control policy intact.

Billionaire wealth shrinkage 2022 YTD

13-Jun-22 06:04 am

Anirudh Sethi

As some assets literally implode, there is a record $2.8 trillion in unused, excess liquidity in the system ($2.2TN in overnight repo, $631BN in Treasury cash).

13-Jun-22 05:54 am

Analysis

Anirudh Sethi

Financial Times survey forecasts a US recession in 2023

13-Jun-22 05:49 am

Analysis

Anirudh Sethi

ft survey 2023 us recession 13 June 2022

Financial Times – Initiative on Global Markets at the University of Chicago’s Booth School of Business

Its a survey of economists.

The Fed is busy hiking interest rates to combat surging inflation. Friday’s figures shook risk markets:

Its FOMC world series of poker week. Three of a kind (325=75bp) beats a pair (225=50bp).

13-Jun-22 05:45 am

Analysis

Anirudh Sethi

The Federal Open Market Committee (FOMC) meeting is this week, Tuesday and Wednesday the 14th and 15th of June.

Market consensus is for a 50bp interest rate hike. Confidence in +50 was shaken after the US CPI data was released on Friday:

US May CPI +8.6% y/y vs 8.3% expected

m/m reading +1.0% vs +0.7% expected and 0.3% prior

Ugly stuff indeed. And 9% inflation may not be too far away:

El-Erian on US CPI inflation says “we may well get to 9%”

Consumers are rattled:

US June prelim UMich consumer sentiment 50.2 vs 58.0 expected

6-point fall in consumer sentiment
down to a record low in the survey’s history (back to the 1970s)

Remarks from FOMC members leading up to the FOMC (prior to the current blackout period) have indicated a 50 basis point hike is to be expected. But does Friday’s CPI blowout (remember, leading into the figures the complacent consensus was that inflation had peaked … ’cause a reading came in lower, sheesh) put a ‘surprise’ 75bp interest rate hike from FOMC back on the table?

The pot hinging on Wednesday’s reveal is large.