Daily Charts - Yields & China
It was the best week for stocks since June despite surging bond yields. The stock market celebrated that the Fed said they would discuss slowing the pace of rate hikes at the November meeting. Key word being discuss.
10Y yield was up 20 bps in the US and 13 bps in Canada WoW. CAD was up 1.7% after USD fell Friday afternoon. Commodities were off, led by natural gas that was off 24%.
Story of the year is the 271 bps move in the US 10Y. Wrecking havoc on markets globally.
The 10Y was trending higher intraday until the news about the Fed leaked.
The rising 10Y yield is putting stress on the global financial system, it must be a matter of time until something goes bust or see intervention. Yields are back to levels not seen since 2008.
This was a good article about some of the market intervention we could plausibly see if yields continue to rise.
We haven’t seen that thing go bust yet, measured quantitatively by the VIX. In previous periods of market turmoil, something broke triggering a spike in the VIX.
Last time real yields were this deeply negative, we saw monetary policy that brought real and nominal yields sharply higher. Massive levels of debt make that harder this time.
We are moving from TINA (There is no alternative) to TARA (Treasuries are a reasonable alternative). Short term treasuries now offer twice the yield as the S&P 500.
Tokyo stepped in to defend the Yen on Friday. From 10:35 am to 3:30 pm EST Friday, $77bn traded interbank in USDJPY. The usual for that time period in the days prior was $4bn. Assuming half of what traded was BoJ ($40bn). That’s 3% of their $1.2T in reserves blown in one day. They blew 4% in Sept. This is not sustainable.
Xi Jinping officially gained his third term as leader of China and consolidated power. There are worries that Xi is isolating himself and shifting towards a more authoritarian regime. Stocks in Hong Kong were are off more than 6% this morning and almost 3% in China.
Since 2000, China’s share of global GDP has quadrupled.
China became a patent powerhouse under Xi.
Xi has increasingly moved towards monitoring his citizens, a less free society, there is now almost 1 security camera for every 2 citizens.
