Global Stocks, US Futures Rebound As Recession Fears Fade, Yields Rise
Not a coincidence that yield's are dropping as the Treasury continues it's planned auction's of issuance. Calling them an auction is a bit comical as the primary dealer's who make up the majority of the buying interest are required to buy in order to maintain the status of being one. Moar of that process later
And just like that, the panicked freakout over tumbling interest rates around the globe is over with calm returning to global markets as a steadier day for Europe and Asia’s markets and a rebound in bond yields helped ease nerves after a jarring few days dominated by recession worries.
Even as over $10 trillion in global debt now carries a negative yield, a sense of optimism swept across global markets with S&P futures climbing sharply on Tuesday, following a rise in European and Asian shares even as Chinese stocks posted another steep, 1.5% drop, pushing the Shanghai Composite below 3,000 for the first time in two weeks.
Yields on US Treasuries rose across the curve after the 10Y yield closing below the effective fed funds rate of 2.4% on Monday, although the spread between three-month and 10-year rates remained in negative territory. The 10Y shed 5 basis points on Monday and a whopping 17.5 basis points since the Federal Reserve last week ditched projections for raising rates this year.
Meanwhile, fed funds rate futures are now fully factoring in a rate cut later this year, with about an 80 percent chance of a move priced in by September.
“The U.S. yield curve continues to invert,” said Michael Every, Hong Kong-based senior Asia-Pacific strategist at Rabobank. “This is not a healthy sign, as bond-market watchers should know and equity-market obsessives should rapidly learn.”
Equities took the modest rebound in stride, as futures on the Dow Jones, Nasdaq and S&P 500 indexes all advanced, and gains in healthcare companies helped the Stoxx Europe 600 into the green. The bond markets remained the main focus though: 10-year German government bond yields remained below zero as European bonds tracked Treasuries lower and the euro edged up against the greenback.
Earlier in Asia, the MSCI index of Asia-Pacific shares rebounded 1% after losing 1.4% in the previous session, though there were some eye-catching moves. Japan’s Nikkei jumped 2.1% after recording its biggest drop since late December on Monday; the Topix Index jumped more than 2.5 percent, a day after it had its biggest slide this year, helping MSCI Asia Pacific index rise one percent; even the Kospi eked out a 0.3% gain despite a profit warning from Samsung. Meanwhile, the selling in China continued, with the Shanghai Composite dropping below 3000 for the first time in 2 weeks.
Going back to bonds, the US Treasury Department will sell $113 billion in coupon notes this week, including $40 billion in two-year notes on Tuesday, $41 billion in five-year notes on Wednesday and $32 billion in seven-year notes on Thursday. Investors will also be watching Fed policymakers scheduled to speak on Tuesday.
With bonds now signalling a recession, the outcome of trade talks between America and China and any developments in Britain’s tortuous exit of the European Union could help determine sentiment from here. “It’s premature to talk about the yield curve meaning that we have to go into recession,” Philip Wyatt, a Hong Kong-based economist for UBS Group AG, said on Bloomberg Television. “It’s possible for the long end to run too far, too fast,” he said of U.S. Treasuries.
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(pump them up just as $10t in debt decided to have negative yield-not like it has a choice to do this or not but rather funny as now the fin. media does not have to talk about that. They were not touching it either way but now they can point to the "happy" number's of the major index's. Never mind that most activity habbens in what is known as dark pools-will be some material on this and Algo trading soon)
https://www.dailyfx.com/crude-oil
https://www.kitco.com/charts/livegold.html
https://www.bloomberg.com/markets/stocks/futures