In today’s briefing:
- Do Not SNOOZE the SLOOS
- Seasonality Watch: Why a Dec hike remains in play
- Portfolio Watch: Staying Afloat in a Storm of Uncertainty
Do Not SNOOZE the SLOOS
- Based on the correlation with the ISM Manufacturing Index, dismissing the SLOOS as a useless macro indicator is a bit too easy.
- Even though lending standards did not tighten as much as the previous quarter, current levels point to elevated odds of a US recession.
- SLOOS also confirms the start of a new default cycle, revealing that high-yield bond spreads are way too low, especially when the spread widening of CMBS is taken into account.
Seasonality Watch: Why a Dec hike remains in play
- Remember the abysmal numbers seen in the US economy around the year-turn of 2022/2023 and the sharp rebound in numbers into February/March (December and January data respectively)?
- Well, for those of you who have been clients of Steno Research since January, it is no surprise that these trends were driven by extreme adjustment activities in spreadsheets.
- The seasonal factors in ISM Manufacturing reached record negative territory in January, but adjustments penciled in for Dec this year are clearly less extreme.
Portfolio Watch: Staying Afloat in a Storm of Uncertainty
- Hello everyone, and welcome back to our weekly Portfolio Watch, where we dive into the latest market trends and candidly assess our portfolio. All the talk in town is the US Treasury market and it seems no matter where you place your chips you are effectively trading the momentum of US bonds, if not directly then by proxy.
- As a token of the current uncertainty within the safest and most liquid fixed-income market in the world, yesterday’s howler of a 30-year treasury auction stands out as an example of just how on-edge nerves are in the financial markets these days.
- If the 30y auction was a reality check on the duration appetite we can only imagine the actual consequences of a standard QRA issuance plan and not the heavy bill-tilted one that Secretary Yellen ended up presenting.
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