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The decoupling between bonds (and the curve) and stocks, commodities and stocks, and economic data and stocks remains a conundrum for many who refuse to accept the reality that the only thing driving this shitshow higher is centrally-sponsored liquidity...
And, as former fund manager and FX trader Richard Breslow points out in his latest note, liquidity itself is as valuable an asset as any other (perhaps more so as we come to the vinegar strokes for The Fed to deliver on its implied promises).
Breslow - Notes - Performance - Bond - Markets
As Breslow notes, the performance of global bond markets has been nothing short of astounding. What they imply in both price and momentum is both impressive and somewhat scary.
Yet, it’s hard not to at least wonder whether they are overdoing it. Time will tell. But, no matter one’s economic forecasts, the desperation evident in the buying seems to go beyond speculative opportunism or short-covering. And, make no mistake, this is a world-wide phenomenon.
Attempt - Trillions - Dollars - Risk - Assets
It’s also possible that we are seeing what is actually an attempt to hedge the untold trillions of dollars of risk assets that have been piled into portfolios over the last decade. It may be the inevitable result of investors having been given no choice, indeed official blessing, but to wait en masse until the band stops playing to demonstrate some caution.
This could be another example of over-leverage exacting the toll it always ends up collecting. And, given the wonders of derivatives, no one can possibly even hazard an educated guess how much more there is to be done. Even the institutions holding those positions.
Income - Effects - Investors - Exposure - Glimpse
If this is what it does to fixed income, one can only imagine what the effects would be if investors started to sell some of the underlying exposure. We may have got a glimpse of that in December. And no one was...
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True or False Prophet, check for God keeping seal of approval.