01 Oct MONDAY WAS THE INVERSE OF FRIDAY…AND THEN THERE IS TODAY’S BOJ DEBT AUCTION
Equities rose following reports that the Administration will not target Chinese capital. Many firms have opined that such action could be potentially disastrous, a view that I share. Beijing did its part on Monday vowing to keep opening its financial markets and encouraging foreign investment.
It is my understanding China and the US will meet on October 10 to discuss trade and perhaps capital flows.
The drama in Washington is still a non-market event perhaps the result of the probability of obtaining 67 votes in the Senate as very low. As noted yesterday some have used the phrase “Kangaroo Court” to describe the fervent rush to judgement.
The more sanguine observers have stated the strategies currently being utilized are a slippery slope, strategies that more often identified with tolaterian regimes and banana republics.
Treasuries were essentially unchanged with attention focused upon this week’s release of the ISM Manufacturing Index, various employment surveys and the ISM Non-Manufacturing Index. All of which can greatly influence macroeconomic perceptions.
Last night the foreign markets were mixed. London was down 0.45%, Paris down 0.29% and Frankfurt down 0.18%. China was down 1.06%, Japan up 0.59% and Hang Sang up 0.53%.
The Dow should open nervously unchanged.
The global bond market—including the US Treasury—is rattled by a weak Japanese debt offering, the weakest since 2016. The Japanese central bank has indicated that it may potentially slash bond purchases and the government pension fund’s plan to buy more foreign debt to offset the impact of negative yields.
In my view it is a huge psychological change, a change that according to Bloomberg is creating massive margin calls given the scope and magnitude and breadth of the sell off. The 10-year is off almost a point to yield 1.73%. The thirty year is off about 1 ½ points.