Latest Posts

rss

Treasury yields pull higher after the long weekend

  
  Analysis

10-year Treasury yields seen up at around 1.36% today

USGG10YR
Yields are nearing the double-top just below 1.38% and that is the key technical region to watch as we get things going on the week.
The overall mood in the market has been a quiet one but keep an eye on bonds in case it kicks some life into things as traders stick with the post-NFP narrative.

 

The move in Treasuries is a bit convoluted given the US jobs report miss but one can argue that the easing of Fed taper expectations could see more durable/lasting inflation be achieved or the simpler explanation being that we have huge supply coming this week.
Either way, the technicals are still the key element to watch in the bond market right now but for the dollar, higher yields aren’t necessarily a comfort factor for now.

Evergrande onshore bond sinks by more than 20% in afternoon trade

  
  Analysis

China Evergrande bonds continue to face a rout this week

The drop here extends the slump from yesterday, following a ratings downgrade by CCXI on Evergrande and its onshore bonds to AA from AAA last week. The ratings firm also placed the company and its bonds on a watchlist for further downgrades.
The downgrade also made the company’s bonds ineligible for use as collateral in repo transactions, prompting an exodus in the domestic market.
The over 20% drop today pertains to Evergrande’s 5.9% May 2023 bond, with its 6.98% January 2023 bond falling by more than 15% and 6.98% July 2022 bond down over 9%.
That already follows the rout yesterday that prompted the Shanghai Stock Exchange to temporarily suspend the 6.98% July 2022 bond due to “abnormal fluctuations”. Evergrande’s 5.9% May 2023 bond also fell by more than 35% yesterday.
Some context on the Evergrande situation from Adam’s post last week:

There’s ample evidence that Chinese markets are trembling. Evergrande — which is China’s second-largest developer — is on the verge of crumbling. It holds $302 billion in liabilities and its bonds are trading at 27-cents from 85-cents in June. It’s struggling to find the money to pay contractors and complete homes. It’s a snowballing crisis and there are signs the central bank has gotten involved with liabilities extending to 128 banks and 121 non-bank institutions.

RBA leaves cash rate unchanged at 0.10% in September monetary policy decision

  
  Analysis

Latest monetary policy decision by the RBA – 7 September 2021

  • Prior 0.10%
  • 3-year bond yields target 0.10%
  • RBA maintains tapering plans, extends purchase period until February
  • Setback to the economic expansion is expected to be only temporary
  • Delta outbreak is expected to delay, but not derail, the recovery
  • Economy will be growing again in the December quarter
  • Expected to be back around its pre-delta path in the second half of next year
  • Much will depend on the health situation and the easing of restrictions on activity
  • Central scenario is that conditions for a rate hike will not be met before 2024
  • Full statement

This is the key passage from the statement but it doesn’t tell the whole story:

The Board’s decision to extend the bond purchases at $4 billion a week until at least February 2022 reflects the delay in the economic recovery and the increased uncertainty associated with the Delta outbreak. The Board will continue to review the bond purchase program in light of economic conditions and the health situation, and their implications for the expected progress towards full employment and the inflation target. These bond purchases, together with the low level of the cash rate, the yield target and the funding that has been provided under the Term Funding Facility, are providing substantial and ongoing support to the Australian economy.

As much as extending its taper plan may sound dovish, they continue to keep a more optimistic (at least as much as can be) on the economic outlook as they maintain that any setback remains “temporary” and that the recovery is only “delayed”.
All things considered though, this isn’t exactly what they had in mind back in July but they are trying to make the most out of it at least.
The question now perhaps becomes how long are they going to kick the can down the road. It’s not exactly tapering if you keep extending the purchase period now, is it?
For now, the optics is arguably what is supporting the aussie with AUD/USD trading up from 0.7440 to 0.7468 and hovering around 0.7460 currently.

Iron ore fell again on Monday, AUD traders eyeing

  
  Analysis

Here’s a longer view of iron ore, its collapsed from its highest earlier this year.

But much, might higher than prices in preceding years.
So, your view of the impact of price moves will be shaded given your timeframe. If you mine the stuff you are still going be happy but shorter-term traders (long side) traders not so much.
Here's a longer view of iron ore, its collapsed from its highest earlier this year. 
The Australian dollar won’t be taking much positive from the slide. Its not the only factor of course.

El Salvador buys 200 bitcoins, adopts the crypto as legal tender from 7 September

  
Analysis, BITCOIN

El Salvador has bought its 200 bitcoins, and will be buying more.

The country’s President, Nayib Bukele, confirmed on Monday the 200 bought and plans for more purchases.
  • “Our brokers will be buying a lot more as the deadline approaches”
Bukele in a tweet.
This guy must be a good politician, I mean he is President of a country! But, as a trader, he sucks. You don’t announce you’ll be buying more! (Unless you are selling, of course, in which case I withdraw my ‘sucks’ judgement.)
BTC on the up!
El Salvador has bought its 200 bitcoins, and will be buying more. 
Go to top