In today’s briefing:
- The US Lost Its AAA-Rating – Why It Does Matter (I)
- Yield Curve Watch: Bull, bear, steeper, flatter? Here is what the data suggests
- CX Daily: How a 140-Year Flood Caught Beijing and Nearby Cities Off Guard
- Great Game – Doom and Gloom for Wheat?
The US Lost Its AAA-Rating – Why It Does Matter (I)
- Assuming rating agencies assume some (implicit) limit to fiscal deficits and debt-to-GDP ratios, even the world’s deepest, liquid, and vital bond market is vulnerable to rating downgrades.
- Soaring interest costs, putting the US on a trajectory of a 10% budget deficit, have prompted Fitch to take its AAA-rating.
- While discussion focus on the unique status of the US Treasury Market, this downgrade touched the underlying issue, debt sustainability.
Yield Curve Watch: Bull, bear, steeper, flatter? Here is what the data suggests
- Welcome to our Yield Curve Watch series.
- Over the next few days, we will assess all asset classes in relation to the yield curve dynamics and back-test what works and what doesn’t work in various curve regimes.
- As most of you have probably noticed by now, we see the steepening case as increasingly compelling from a macro perspective as (What a great day to write that with material bull-flattening across the board)1) The issuance profile will move towards longer durations2) The Manufacturing rebound was driven by an input cost decline (see chart 1)3) The BoJ decision has decreased Japanese incentives to buy USTs (see chart 2)4) Positioning is already loaded with duration5) Headline inflation will likely increase (bull market in commodities) paired with declining core inflation in annual termsThe flattener case will only continue to work if central banks re-accelerate the tightening cycle amidst falling core inflation, which we find unlikely given the recent signal sent by the Fed and the ECB.
CX Daily: How a 140-Year Flood Caught Beijing and Nearby Cities Off Guard
- Flood /Cover Story: How a 140-year flood caught Beijing and nearby cities off guard
- FDI /Chart of the Day: Foreign investment in China tumbles on overseas headwinds
- Economy /Chinese economic officials at pains to tout efficacy of recovery stimulus
Great Game – Doom and Gloom for Wheat?
- We’ve talked a lot about “back to the 70’s” over the past year or two.
- The increased focus on energy, security and old school production bring memories back to decades of past.
- However, we may also have to go “back to the 1700’s” as wheat production and prices are very much back in the picture! That’s what we’ll dive into in this edition of the Great Game, where we weigh different potential market shocks caused by political developments and why developments in India are actually more important to the wheat prices than Ukraine and Russia.
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