Greetings,
We begin with the results of our Bond Selloff survey (by Matt Garrett) where we had 1,512 participants.Â
1. What was the top contributor to the September global bond selloff that saw US 30yr yields rise >25bps in a week?
We’ve received a number of comments on this first question. Here are some of them. A. I took the survey on the bond market correction, but was disappointed not to see the BoJ in any of the answers. Their focus on steepening the curve has likely had more influence than the Fed and should have more influence in the week ahead, too. See Fig 2 below (from our FX Atlas).
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Cheers,
Jeff
B. I think the survey should have an “other” option with space for description.
For the first question, I think signals that the BoJ will take action next week to steepen the JGB yield curve is behind the selling of the long end. It’s somewhat related to general sense that BoJ and ECB are running out of options to decrease rates further abut the catalyst I think is people expecting the BoJ to do that.Â
Best
ScottÂ
C. I have done your survey but I think the real reason for the selloff could be Henkel and Sanofi issuing bonds at negative rates [these are European corporate bond issuers]. Sometimes things stay ridiculous for an extended period and then suddenly the market wakes up to reality. The trigger is often just the credibility elastic being stretched that bit too far and I think this was one of those situations. Not really a crowded trade as the crowd is central banks, and nobody buying this believes that they are making a rational investment.
Cheers
Steve
2. What will global yields do in the remainder of 2016?
3. At their September meeting next week the Fed will
1. Next, let’s look at emerging markets where Mexico’s government bond yield has been on the rise.
2. The FT points out that the peso continues to be driven by Donald Trump’s election odds (as Trump’s polling improves, the peso weakens). Perhaps.
Source: @fastFT; Read full article here
3. Brazil’s real GDP indicator missed forecasts. Here is a comment/chart from Goldman.
