Markets were relatively quiet yesterday following the President’s statement that he would not use force to acquire Greenland, calling for immediate negotiations.
Equites gained further momentum later in the day as the President said there is a “framework” for a deal.
The Treasury market also was considerably quieter following the realization that there may not be mass selling of the UST, partially upon the realization that the Danish pension fund that stated it will sell its holdings own only $100 million. Most will acknowledge the whole sale selling of Treasuries would be the proverbial nuclear option…aka MAD III.
Speaking of Treasuries, the $13 billion auction of the 20-year was uneventful, perhaps the result the debt was “cheapened” the day before and made it more attractive.
Commenting further about the Treasuries, legendary hedge fund investor Ken Griffen states the selloff in the Japanese bond market has an “explicit warning” to US politicians to improve the nation’s finances and “get out our fiscal house in order before the bond vigilantes come out and extract a harsh price.”
Griffin further stated the obvious…the longer before acting the more draconian the actions must be.
Perhaps also of significance yesterday, the Supreme Court suggested that it wary of the President’s effort to fire Federal reserve Governor Lisa Cook over alleged mortgage fraud allegations, stating the move could upend the Fed’s independence and “rattle markets.”
Some were surprised that Trump’s own appointees were among the skeptics stating, “the President’s position would weaken if not shatter the independence of the Federal Reserve.”
Speaking of the Fed, the narrative is rising as to whether the Central Bank should continue to expand its balance sheet or again attempt to remove liquidity from the financial markets. The Fed is again conducting QE because liquidity was rapidly draining, fearing another 2020 fiasco.
Most will acknowledge the Federal Reserve has artificially depressed interest rates for a prolonged period of time and that Central Bank has made the financial markets overly dependent on its support.
What will happen today?
Last night the foreign markets were up. London was up 0.22%, Paris up 0.98% and Frankfurt up 1.10%. China was up 0.14%, Japan up 1.73% and Hang Seng up 0.17%.
Dow and NASDQ futures are up 0.25% and 0.75%, respectively on the President’s pivot on Greenland and the belief that AI spending and the benefits of such will materialize. The 10-year is up 1/32 to yield 4.24%.
