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Payrolls, Another 10-year Yield High, Bait & Switch Shot

While concerns mounts about increasing workforce disability and vaccine hesitancy ,the Nobel Prize’s role in combatting skepticism is questioned. Fed will now have to keep rates higher for longer and the 10-year yield at 16-year highs predicts that eventually a whole bunch of heavily-indebted companies are going to die – some of which will be hoovered up on the cheap by the Oligarchy. 

user profile picture davefairtex Oct 08, 2023
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  • Nonfarm Payrolls (PAYEMS): +336k (+2.03%) m/m.
  • Auto/Light Truck Sales (ALTSALES): 323k (+2.06%) m/m.
  • Durable Goods Orders (DGORDER) 284B (+420M +2.06%) m/m.
  • 30 Year Mortgage (MORTGAGE30US): 7.49% (+18 bp); new high.
  • 10 Year Treasury (DGS10): 4.79% (+20 bp); new high.
  • Fed Balance Sheet (WALCL): -46B (-0.58%) w/w.
  • Total Bank Credit (TOTBKCR): -5.9B (-0.03%) w/w.
  • Strategic Petroleum Reserve (WCSSTUS1): +300k (+0.09%) w/w; slight refill.

Payrolls were surprisingly strong (expected 160k, actual 336k), and this drove some pretty impressive market volatility on Friday – first a plunge in gold silver, equities, and the Euro, followed by an even stronger bounce-back rally – 30 minutes later in the metals, and about 2 hours later in equities and the Euro.  I don’t pretend to understand why these violent moves happened – first in one direction, then the other.  To me, it seems as though “higher for longer” remains in place – CME Fedwatch says 27% chance of a rate hike at the meeting on November 1, with no chance of a rate cut.

While “20 basis points” doesn’t look like a very big move in the 10-year yield (red line), it translated into a 4.4% drop in the value of the 20-year bond fund TLT this week alone, and a 50% loss to capital (candlesticks) for anyone who bought this fund back in mid-2020 at $171/share.  Big buyers of bonds are pension funds, and banks.  The new high in the 10-year yield was the big news for the week, at least for me anyway.  Note that the 30-year mortgage rate is closely tied (directionally) to the 10-year yield; both yields hit new highs this week.

The buck broke out to a new 10-month high (almost 1.07) early in the week, but then sold off fairly hard on Thursday and Friday, erasing the gains and printing a bearish-looking “northern doji” candle with that disagreeable long upper shadow.  This was enough to flip my trend model into a shallow downtrend.  Why did this reversal happen?  No idea – the Euro had a similar move, in reverse, but it remains in a downtrend. 

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