THEY’RE ALL HEDGING NOW
Summary: A busy day in Oceana. RBA cut rates for the first time since 2020, making the last of the rate cutting cycles to kick off - or, the tail end of the rate cut cycle, singular. Globally synchronized is apparent in what RBA did as much as next door in New Zealand where far clearer yet similar degradation convinced the central bank there to cut by another fifty. There is as much political pressure in all places driving the sudden hedging on rates from central bankers everywhere - including, now, Australia.
MR. BULLARD WOULD LIKE A CURVE WORD
Summary: More volatility in markets, including stocks. Bond yields were down sharply, before turned around on tariff news. Target added to the negatives with several warnings, the first of which further verified the growing “growth scare.” With market interest rates already down sharply, attention turns to the short end. Forward rate markets are beginning to creep toward a sooner Fed rate cut trigger, with one key contract crossing its threshold. The history of the Fed with the yield curve sets out the dynamic, one that has been kept from the public.
QUITE CERTAIN ABOUT THIS UNCERTAINTY
Summary: Practically everyone keeps blaming “uncertainty” for all the “unexpected” results showing up in more and more places. The thing is, the data is getting more certain not less. February’s labor data was conclusive across all the key aspects. Even the Establishment Survey contributed to settling the short run question in the economy, and then added much to the more important interpretation of the jobs market’s overall condition. There is no wiggle room here any longer.
THE REAL LEGACY OF SVB IS TRENDING
Summary: The dollar soared in December and January. Everyone said it was Jay Powell. We now have more than enough evidence to conclusively show, no surprise, it wasn’t. Instead, a pretty significant dollar crisis when primary dealers hoarded massive amounts of Treasuries and foreign central banks and govts used massive amounts of theirs. But it’s the background which led to this which needs reviewing for what it means about a lot more than this recent monetary breakdown. This starts with Silicon Valley Bank.
INDIA PREMIUM
Summary: India’s banking situation has gotten to be a disorderly mess. RBI has had to initiate swaps, TOMOs, repo auctions, what they even called a “bazooka” to calm things down. Where did all this come from? Consequences from the eurodollar premium. According to the latest indications from it, such as primary dealers hoarding another massive record high in Treasury assets and very low yields on Japanese bills, this latest disruption isn’t yet done. The dollar has lost some of its urgency on trade wars fluctuations, not its background premium.