UST MORNING CALL: Negative Rates ‘Spooking the Markets’
(Bloomberg) -- “Stocks are weaker and Treasuries making new yield lows” with “some of the excuses” including “weaker oil responding to yesterday’s DoE data,” and “apparently disappointment over the way Yellen fumbled on the question of negative rates,” CRT strategist David Ader says in note.
- “These aggressive moves to negative rates are the very thing spooking the markets,” and “if accommodation heretofore hasn’t really boosted growth and only inflated risk assets then perhaps markets sense monetary policies have reached the end of their tether ... or broken it”
- “We continue to fret over overbought momentum and sentiment measures and while the bearish bias has largely been wrong these last several days the volatility could bail us out if we had the temperament to have, let alone hold, a position in its midst”
- Other observations from strategist morning notes:
- BMO (Aaron Kohli): “Some of the rally in Treasuries is certainly attributable to concerns over China’s economy, financial markets, and their policy response. But it came as some surprise that Yellen was so explicit about it in yesterday’s Congressional testimony”
- Marty Mitchell (independent): “Strong demand for long Treasuries is a result of attractive yields vs overseas, deflation concerns, curve flattening momentum, and pure fear”
- “De-risking continues because there is just no way to know what the next troubling headline will be,” and “the only certainty is that there will be more to come and no one wants to be left holding when they scroll across the tape”
- “Market is saying that the Fed is crazy to even be considering more rate hikes and that the Fed is unaware of the harsh realities that are resulting from the unwinding of risk that was promoted by the Fed’s own easy money policies”
- RBS (John Briggs): “Markets it would appear, took little time to digest and act upon the signaling Yellen provided yesterday, with OIS markets re-pricing meeting probabilities lower than where they stood on the day before the her semiannual testimony” and UST 10Y yield touching 2012 levels
- “It is perhaps instructive to recall that this time to which yields are hurtling back toward was marked by the taper tantrum that set off a major reset of the U.S. rates complex to essentially the average level that has prevailed over the past two and-a-half years or so”
Alert:
HALISTER1Source: BFW (Bloomberg First Word)
People Aaron Kohli (Bank of Montreal)
David Ader (CRT Capital Group LLC)
John Briggs (RBS Securities Inc)
Marty Mitchell (The Mitchell Market Report LLC)
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