top of page
  • Writer's pictureEdward Ballsdon

Rear view driving is dangerous.

Research Content


Following the NFP, which delivered another outsized move in bond yields, this note examines some issues that are impacting markets and others in the background that are likely to have a meaningful influence, perhaps without warning. In summary:

 

  • Friday’s intraday move was not abnormal when compared to other periods of changing interest rates.

  • Comparing the employment data to a typical cycle suggests an economic contraction has started.

  • Recent statements show there is a “herding” mentality in numerous Central Banks.

  • Whilst CPI will be key in the short term, it is a far simpler piece of data for the market to digest, with surprises unlikely to cause too much upset given the much less aggressive money market strips.

  • In the medium term, though, unemployment data and credit quality data are where surprises are likely to come from (due to tight monetary policies)

  • There is now clearly a risk of extended tighter global policy, which will be detrimental to economies.

  • The Magnificent 7 are now the Magnificent 2. There is a revaluation risk to the “Plain 3” – the sums are large.

  • The rise in yields post NFP stopped at/below the 2024 highs. Bonds are even more attractive now due to the risk of overtightening, but those yield highs should be a stop for longs.

72 views0 comments

Recent Posts

See All

BoJ still in a Straitjacket

RESEARCH CONTENT This report discusses the market speculation about when the BoJ would tighten policy and take rates positive. It notes that there has not been much volatility in JGBs or $Yen – they h

Bank of Canada & Inflation

RESEARCH CONTENT Yesterday the Bank of Canada kept rates unchanged and noted that "the economy had stalled since the middle of 2023, consumers have pulled back their spending, business investment had

Market Observations - Simple correction or more?

REPORT CONTENT This note examines recent extreme bond moves, trying to assess whether it is something new or just a correction offering an opportunity to enter at more favourable levels. In summary: T

bottom of page