SignalPlus Macro Research Report Special Edition: GRAVITY
U.S. Treasuries came under pressure again yesterday after a brief respite as other markets softened, strong housing data coupled with another poor bond auction performance (5-year), and early in the session strong German IFO results and UK gilt supply This caused the U.S. Treasury yield curve to show a bearish trend, and large-scale futures trading volume entered the low-liquidity market (only about 60% of the monthly average), which caused yields to continue to face pressure when entering the New York trading session, and risk aversion Sentiment continued to rise after the U.S. opened, with gold prices closing above $1,980 even as yields moved higher, and crude oil reversed course and rebounded nearly 4%, recouping early losses.
U.S. economic data remains exceptionally strong, with new home sales soaring 12.3% month-on-month, the fastest growth rate since the beginning of 2022, exceeding all investment bank forecasts, and despite extremely high mortgage costs, house prices have fallen to the lowest level since February 2022 due to inventory. rose from the lowest level; the Bank of Canada further added fuel to the fire with hawkish comments, stating that we remain concerned about persistent inflationary pressures and are prepared to further increase policy interest rates if necessary; finally, more and more media have continued to comment on The ballooning deficit expressed concern and raised concerns about the upcoming refinancing of U.S. Treasuries in November, adding more pressure on yields that appear to be slipping away from the Feds control.
As a final blow (yesterday), the $52 billion 5-year bond auction produced extremely poor results, with a tail of 1.9 basis points and a bid-to-cover ratio of 2.36 times, the weakest level since September 2022, with overall auction data Its bad, traders account for 19.4% of overall supply, the highest level since September 2022, indirect bids are 2 sigma below average, lack of demand for bonds pushes yields up another 2 basis points, and the yield curve closed higher yesterday 10-15 basis points, and affected the stock market to weaken in the afternoon session; investors will focus on PCE data today (expected to increase by 4% month-on-month, core month-on-month growth of 2.5%), which is the next challenge that the market needs to overcome.
The stock market fell across the board, with the SPX index falling nearly 1.5% and the Nasdaq index falling 2.5%. Continued pressure on yields and poor performance led to the third largest single-day drop in Alphabets stock price since its IPO in 2004 (!!!). In addition, , although Metas revenue and user growth exceeded analysts estimates, and its quarterly profit was one of its best in recent times, Metas stock price fell as the CFOs warning about weak advertising trends in the fourth quarter raised investor concerns. It fell 5% after hours. We believe that the relatively extreme reaction of investors in a very solid earnings season reflects a strong shift in market risk sentiment, and risk assets are likely to experience a more difficult period in the coming weeks.
Further exacerbating the negative sentiment in the market is the recent focus on the de-inversion of the yield curve. Although many bond investors who do not frequently trade were worried in early 2023 that the inversion of the yield curve represented the arrival of an economic recession, in fact, earnings The inversion of the interest rate curve often indicates an impending economic slowdown. Although nothing in the market is 100% certain, historically, stocks usually do not perform well after an inversion, and we currently tend to From this point of view, please be careful when making transactions.
In terms of cryptocurrencies, Bitcoin remains a relatively stable and safe haven in the short term. Despite the challenges of the macro environment, the relatively serious imbalance between supply and demand (the market continues to buy in anticipation of ETFs) has helped the price remain stable, although the price may Lower as the stock market collapses further, but we may have entered a new higher price range for BTC, and $32,000 may be a reasonable floor in the short term; as prices move higher, implied volatility also comes to a higher level , bullish spreads and directly long spot may be the more recommended long strategies at this stage.
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