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ICYMI – Norway’s central bank rate hike Thursday

  
  Analysis
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Norges Bank Norway’s central bank raised its benchmark interest rate on Thursday, raised the sight deposit rate to 0.25%

  • from zero
  • the hike was as expected
The Bank said it expect to do the same again in December, another hike
  • and three more hikes by the end of 2022 (to 1.25%) had become more likely.
The governor of the Norwegian central bank spoke at a press conference after:
  • There is a strong recovery in the Norwegian economy
  • It’s time to start a gradual normalisation of the policy rate

The 10 year yield trades above 100 day MA for first time since June 16

  
  Analysis
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Price cracks above the recent ceiling near 1.385%

The 10 yield yield has moved to the highest level since July 14 and in the process has moved above recent ceiling near 1.385%. The price is also above the 38.2% retracement of the move down from the March 30 high at 1.375% and finally in the 100 day moving average 1.405%. The current yield is trading at 1.415%.
US 10 year yield
The next target will be at the 50% midpoint of the move down from the March 30 high at 1.452% get above that and there is more room to roam with 1.53% as another target area.
Despite higher inflation, and expectations of taper, the 10 year yield is still well below the high for the year at 1.774%. Overseas demand has been very strong especially in the longer end as concerns about Covid and higher rates in the US have investors parking funds in the liquid US debt instruments. With the Fed now targeting inflation over 2% in 2022 and 2023, the real return at 1.415% is negative. Nevertheless, it beats parking funds in France at near 0.07%.

The major US indices close higher with the Dow leading the way

  
Analysis, US Market

The NASDAQ is up for the third day.

The major US indices are closing higher with the Dow leading the way.  Indices are higher despite sharp rises in yields. The NASDAQ index, which tends to be more sensitive to higher rates, did lag, but it still had a gain of over 1% on the day.
The final numbers are showing:
  • Dow up 506.5 points or 1.48% at 34764.82. At the the Dow was up 621.46 points or 1.81%
  • S&P index closed up 53.36 points or 1.21% at 4448.99 it was up 70.16 points at it’s high or 1.6% the NASDAQ index closed up 155.41 points or 1.04% at 15052.25. At the highs, the NASDAQ was up 188.6 points or 1.27%
  • The Russell 2000 index was up 40.48 points or 1.82% at 2259.04

US household net worth rose to $141.7T in Q2 vs $118.5T a year earlier

  
  Analysis

That’s a big jump

US household net worth rose nearly 20% in the prior year through Q2, according to the latest Fed data. Easy money policies at the fiscal and monetary level have led to enormous booms in home prices and financial assets.
In Q2 alone, wealth rose to $141.7T from $135.8T with stock market gains adding about $3.5 trillion of that and real estate $1.2 trillion.
Of all that wealth, about $3.6 trillion is held in checking accounts and $10.6 trillion in savings accounts.

US 10-year yields jump to a two-month high. US dollar benefits

  
Analysis, Forex

Heavy selling in bonds

Heavy selling in bonds
US 10 year yields are surging.
They’re now up 7.7 bps on the day to 1.4078%. It’s the first trip above 1.40% since mid-July and breaks a quadruple top ahead of the level.
Initially, the bond market was trading like the Fed taper was a policy mistake as long end rates fell yesterday. However it’s all turning around today as less Fed buying plus the fear of inflation plus great risk sentiment life bonds.
The risk now is that a negative feedback loop starts for stocks. Tech in particular has been sensitive to higher rates.
In FX, the US dollar is beginning to fight back in the last 10 minutes on rate differentials. Note though that global bonds are generally moving in tandem with US rates.

Fitch cuts its China 2021 GDP forecast to 8.1% (from 8.4%)

  
Analysis, Economy

Fitch ratings citing the property slowdown

  • “deleveraging dynamics” weighing on recovery
  • government policy is being recalibrated
  • housing to take a toll on domestic demand, global commodities
Fitch says more broadly that challenges to EM growth in 2022 are rising.
So the world’s second-largest economy is only going to grow at 8.1%?
We are all doomed (sarcasm).
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