Japan was a bag of nerves today following the sell-off seen in JGB’s as 10yr rates moved from 3.5bp to 9.5bp. Only 6 BP move but ask Bond traders ….This is a HUGE MOVE , JGB are known as widow makers.
This is the clearest example of a bubble. Think about this… The Bank of Japan makes a tiny, minuscule, ridiculous alteration to its monetary laughing gas policy,and sends bonds and markets rolling
The BOJ were forced to address the issue after talk that they were engaging in “unusual active discussions” according to an earlier Reuters quote. 10yr bonds closed around 8bp whilst Super-long 30yr closed 0.785%.
Martin Armstrong writes in his blog that…This is typical of the market not knowing how to interpret a move of higher rates from an unreal absolute level. Shanghai is moving on the Yuan move opening negative then spent the day trading higher to close up 1% by the close. More Yuan weakness is expected. SENSEX continues to benefit from the weakening INR ( yes slowly depreciating currency is like a fiscal stimulus) and even managed a all-time peak intraday, this has more legs yet.
European stock indices were lower during the morning session, but that is probably a result of USD strength in the afternoon.
The cash flow continues to find its way to the US and that only looks to be accelerating. European bonds are starting to weigh on markets, even though volumes are light. US markets were traded within an extremely tight range given recent activity. After hours the Alphabet release was better than expected and shares jumped another 4%.
Banks shares are rallying as global bond market yields rise and curve steepening ( good for banks profitability).
On Friday we see the US GDP release and a possible 5%+ ( as per Barclays) highest since 2003 and that could really set things going! Momentum remains strong supported by earnings, a healthy GDP number will light the fuse.
So who is bearish on equities and bullish on Bonds?
More on Macro Call on Global markets please read this 9th July post.
http://worldoutofwhack.com/2018/07/09/market-view-is-the-coast-clear/