In today’s briefing:
- Steno Signals #67 – 150bps Higher 10yr Yields and Parity up Next in EURUSD?
- Testing Times Loom for US Treasury Market Functionality with Potential Global Consequences
- FX Watch: The world needs a Riyadh accord more than a Plaza Accord 2.0
- Positioning Watch – Oil Longs Are Not as Big as You Think
- The Week That Was in ASEAN@Smartkarma – Sea Ltd & TikTok, Prodia, and Matahari Department Store
Steno Signals #67 – 150bps Higher 10yr Yields and Parity up Next in EURUSD?
- There are good reasons to chant “Europe, Europe, Europe” on the golf course, but not in financial markets as Europe is once again tested by commodity developments.
Oil markets remain in the driver’s seat of everything in Global Macro and even if it already feels like this energy squeeze is old hat, we find a continued strong risk/reward in betting on higher energy prices.
Our “chart of the week” reveals that the paper-market volume behind this latest oil market rally is very low, leaving the fear of a stretched positioning relatively dampened, which will allow the undersupplied physical market to drive price action.
Testing Times Loom for US Treasury Market Functionality with Potential Global Consequences
- The significant incursion into the US Treasury market by the Fed has imparted legacy issues that potentially undermine its functionality. Primary dealers’ capacity to undertake market-making has been impaired.
- Hedge funds are playing a larger role in the distribution and provision of price information of Treasuries to other investors via the use of leverage in the repo market.
- Significant dysfunctionality in the US Treasury market has adverse implications for global liquidity due to its influence on riskier segments of the capital structure, notably corporate bonds and equities.
FX Watch: The world needs a Riyadh accord more than a Plaza Accord 2.0
- “I’ve said on many occasions that I think a market-determined value for the dollar is in America’s interest.
- And I continue to feel that way.” Janet Yellen, October 2022Janet Yellen basically wrote off the possibility of a Plaza Accord 2.0 (coordinated action against a strong USD) in Q4-2022 when the energy crisis was at its peak with a strong USD against almost all peers.
- The current situation looks mostly reminiscent of last year, why we struggle to see why the US authorities should alter their view.
Positioning Watch – Oil Longs Are Not as Big as You Think
- Welcome back to our weekly positioning watch, where we run through interest positioning insights/data collected throughout the week.
- It’s safe to say that energy is all everyone is talking about with the oil rally still going strong, but the trade might have more to give as positioning is not as exhausted as some people might tell you.
- When you take into account the number of traders in the CFTC report, oil positioning is barely anything compared to history.
The Week That Was in ASEAN@Smartkarma – Sea Ltd & TikTok, Prodia, and Matahari Department Store
- The past week saw insights on Sea Ltd, Prodia, Kalbe Farma, Matahari Department Store, Mitra Keluarga, Delta Electronics Thailand and Pakuwon Jati.
- There was also a macro insight into prospects for the Indonesian economy, a PCOMP rebalance, Singspore’s ESG appeal, Malaysian Banks, Singapore Tourism stocks, and TSH Resources (TSH MK).
- The Week That Was in ASEAN@Smartkarma is filled with an eclectic mix of differentiated, substantive, and actionable insights, macro and equity bottom-up, from across Southeast Asia.
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