Morning Report – Big Reversal in Bunds 5/4/15

Stocks are higher this morning after a stronger-than-expected European manufacturing report eased fears of deflation. Bonds and MBS are up small.

This week has some important economic data, with the biggest being the jobs report on Friday. The market has been backing away from the June rate hike forecast, and IMO the jobs report will have to be outstanding (300k+ payrolls, and a meaningful increase in wages) to bring a June tightening back into play. We will also get productivity and unit labor costs this week, which will figure heavily into the Fed’s thinking.

The ISM New York Index increased to 58.1 from 50 in March. Factory Orders rose 2.1%, topping the analyst 2% forecast.

A few stronger than expected economic reports turned around G7 debt in a hurry. The German Bund, which hit a record low of 7.5 basis points two weeks ago is now trading at a 41.5 basis point yield, which is a 3 month high. G7 sovereigns have been a one-way bet for a long time, so a sell-off is to be expected.

Bill Gross’s latest Investment Outlook is good. He is calling for the end of the secular bull market in bonds and is recommending shorting the Bund (good trade over the past two weeks). He also believes that cheap credit, which has fueled the bull market in stocks is going to slowly dry up. Is he suggesting to sell your portfolio and bury the cash in the back yard? Not at all. However he is arguing that the trade going forward may be focusing on lightly levered income trades instead of searching for capital gains.

Delinquencies and foreclosures continue to drop, according to the Black Knight Mortgage Monitor.

9 Responses

  1. Heh. Frist.

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  2. So, i threw my hat in the ring for something. mostly because i just had to. you can’t pass up a chance to join.

    http://www.bing.com/videos/watch/video/thank-you-for-smoking-clip-the-mod-squad/5d2y9ra

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  3. Krugman reminds me of why I fight the “war on we”. He’s not talking about raising taxes on himself to fund his proposals.

    “Despite this, measures that correct well-known flaws in the statistics show that we have made some real progress against poverty. And we would make a lot more progress if we were even a fraction as generous toward the needy as we imagine ourselves to be.

    The point is that there is no excuse for fatalism as we contemplate the evils of poverty in America. Shrugging your shoulders as you attribute it all to values is an act of malign neglect. The poor don’t need lectures on morality, they need more resources — which we can afford to provide — and better economic opportunities, which we can also afford to provide through everything from training and subsidies to higher minimum wages. Baltimore, and America, don’t have to be as unjust as they are.”

    http://www.nytimes.com/2015/05/04/opinion/paul-krugman-race-class-and-neglect.html?ref=opinion

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  4. Vox discovers it’s not original.

    http://www.vox.com/2015/5/4/8544029/think-piece-hot-take

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  5. Like

  6. It’s official. The Abrams Star Wars movie is going to suck. The male lead from HBO’s Girls is the villain.

    http://www.vanityfair.com/hollywood/photos/2015/05/star-wars-the-force-awakens-photos-annie-leibovitz#4

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  7. why is that bad? i’m excited for it . but i’m not familiar with Girls.

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  8. I’m still, STILL sickened over your dislike of the Star Trek reboot.

    And I haven’t forgotten about your (gag) “love” (gag) for Boston,Brent.

    #Re-AiringofGrievances

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