Morning Report: Bonds getting beat up by Mario Draghi comments 6/3/15

Posted on June 3, 2015 by Brent Nyitray

There is a definite “risk on” feel to the market this morning after Mario Draghi committed to keep QE until at least September 2016. He also warned bond investors to expect more volatility, which is also depressing bonds worldwide. Peripheral European bonds (the nice term for the PIIGS) are rallying, while the Northern European bonds sell off. The German Bund yield is 80 basis points – hard to believe it was at 7 basis points a couple months ago. The sell-off in G7 debt is spilling over to US Treasuries which are trading at 2.32%, a six month high.

The trade deficit narrowed in May as the West Coast port strike ended. This could add a small boost to Q2 GDP, although no one expects a Q2 / Q3 rebound of 4%-5% like we had last year.

The ISM Non-Manufacturing Index fell to 55.7 from 57.8 in May. This index level would typically be associated with GDP growth around 3%.

Mortgage applications fell last week by 7.6% as purchases fell 3% and refis fell 11.5%. Last week was shortened by the Memorial Day holiday, so don’t read too much into that number.

The ADP Employment Change index showed 201,000 jobs were created in May. We will get the official jobs report on Friday. The Street is forecasting 227,000 jobs were created in May. I can’t see Friday’s jobs report being market-moving unless it is unusually strong. That said, we have the first Greek deadline on Friday as well, so bonds could be in for a bumpy ride regardless. Manufacturing jobs contracted for the third month in a row, while construction jobs (a sort of proxy for housing) increased by 27,000. Construction employment levels haven’t returned to pre-crisis levels yet, but they are slowly getting back.

Home prices rose 6.8% year-over-year in April, according to CoreLogic. They remain 9% below their April 2006 peak. Some states are back to pre-crisis levels: Texas, Tennessee, New York (?!). Nevada, Florida, and Rhode Island are still around 30% below peak levels. The New York number doesn’t make a lot of sense, unless Manhattan real estate is really influencing the numbers. CT and NJ are 25% and 22% below peak levels, respectively. California is down 10.6% from the peak levels.

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16 Responses

  1. ScottC's avatar
    ScottC, on June 3, 2015 at 10:08 am said:

    Interesting take on the fundamental contradiction within the cultural embrace and celebration of transgenderism.

    http://thefederalist.com/2015/06/03/bruce-jenners-transformation-is-a-lose-lose-for-leftists/

    For years, a major aim of the sexual revolution has been to deconstruct gender differences as being “social constructs,” mere cultural projections of what maleness and femaleness are and mean. This critique evacuated gender of any physical meaning and reduced it to an existential feeling—a feeling of being male or female, regardless of one’s sexual biology….

    This is the ideology that governs liberal sexual philosophy, and it collides head-on with major aspects of the transgender movement. Transgenderism is unavoidably based on a kind of gender essentialism. It recognizes gender identities as being associated with certain socially accepted norms. What does it mean, for example, that Jenner’s “gender” is female? It means that he gets a sex change. It means that he poses in traditionally female attire for the cover of Vanity Fair. It means that he reaffirms traditional gender norms, even as he attempts to flee from them.

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  2. jnc4p's avatar
    jnc4p, on June 3, 2015 at 2:00 pm said:

    “This is terrifying. No one will ever accept that. And if that becomes a salient part of liberal politics, liberals are going to suffer tremendous electoral defeat.”

    This is a problem because?

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    • ScottC's avatar
      ScottC, on June 3, 2015 at 3:40 pm said:

      jnc:

      This is a problem because?

      Ace pointed out this one:

      But part of the female professors’ shtick was the strong insistence that harassment victims should never be asked for proof, that an enunciation of an accusation is all it should ever take to secure a guilty verdict. The identity of the victims overrides the identity of the harasser, and that’s all the proof they need.

      This is terrifying. No one will ever accept that. And if that becomes a salient part of liberal politics, liberals are going to suffer tremendous electoral defeat.

      Makes one wonder…if it wouldn’t result in liberal defeat at the ballot box, would it then be OK?

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  3. jnc4p's avatar
    jnc4p, on June 3, 2015 at 2:04 pm said:

    Elizabeth Warren joins the “War on Women”.

    “As pushback against Warren’s criticisms, Politico offered the idea that “some Democrats worry that Warren in her sharp attack on White, the most prominent female regulator in Washington, is now pushing the party even farther to the left in ways that could complicate the election prospects for likely nominee Hillary Clinton as well as the party’s congressional candidates.””

    http://www.vox.com/2015/6/3/8716327/elizabeth-warren-mary-jo-white

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  4. jnc4p's avatar
    jnc4p, on June 3, 2015 at 2:09 pm said:

    Uber vs the French taxi cartel.

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  5. Let the mutherfuker burn!'s avatar
    Let the mutherfuker burn!, on June 3, 2015 at 3:14 pm said:

    We’re predators, weakness draws aggression.

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  7. novahockey's avatar
    novahockey, on June 3, 2015 at 3:23 pm said:

    it is terrifying, but i have to see proof that people won’t accept it.

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  8. novahockey's avatar
    novahockey, on June 3, 2015 at 3:24 pm said:

    i think the prof is confused. he’s a liberal and his students are fascists. which is a left wing ideology. and he can’t see it.

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  9. jnc4p's avatar
    jnc4p, on June 3, 2015 at 3:43 pm said:

    “This is a problem because?”

    I was referencing the “liberals are going to suffer tremendous electoral defeat.” when I was commenting on the lack of a discernible problem.

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    • ScottC's avatar
      ScottC, on June 3, 2015 at 3:51 pm said:

      Yeah, sorry. I understood. I was just pointing out another questionable aspect of what he was arguing.

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      • ScottC's avatar
        ScottC, on June 4, 2015 at 7:39 am said:

        A question just occurred to me: Does Caitlyn Jenner have more moral authority than Bruce Jenner when it comes to “women’s issues” like abortion?

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  10. novahockey's avatar
    novahockey, on June 4, 2015 at 8:39 am said:

    depends on what Jenner’s view is.

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