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Tag Archives: Treasuries

US Struggles to Strike a Less Strident Tone

Overview: Retail sales and industrial production disappointed in both the US and China prior to the end of the tariff truce, declared by the US in a series of presidential tweets on May 5.  The reaction function of the US to the drop in equities was to play down tensions on three fronts.  First, a US team is expected to return to Beijing in the coming weeks.  Second, Trump pushed out the decision about auto tariffs until the end of the year and hangs over the bilateral talks with Japan...

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Why China Finds it Difficult to Weaponize the Yuan and US Treasuries

It looks so easy on paper.  China can sell its holding of US Treasuries and/or weaken the yuan to offset the tariffs and boost exports.  It is the first and easy answer from strategists, journalists, and some academics.   Often times, it is presented as a novel idea; as if diplomats, investors, and policymakers have not thought it.  The point is not that China cannot sell its Treasury holdings or that it cannot devalue the yuan.  The point that has already been explored, arguably ad...

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Monthly Macro Monitor: Well Worried

Don’t waste your time worrying about things that are well worried. Well worried. One of the best turns of phrase I’ve ever heard in this business that has more than its fair share of adages and idioms. It is also one of the first – and best – lessons I learned from my original mentor in this business. The things you see in the headlines, the things everyone is already worried about, aren’t usually worth fretting over. The market may not be perfectly efficient...

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The Week Ahead is Mostly About Digestion

The information set investors have is unlikely to substantively change in the coming days.  The important macro points are known.  The first part of February may be about digesting and making sense of that information rather than an incremental increase.    Investors had been concerned about what has become known as "quantitative tightening" or "QT".  It is the opposite of QE.  Collectively the central banks' balance sheets were no longer to be growing on a net basis....

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Keep Fitch’s Warning in Perspective

The global head of Fitch's sovereign ratings warned that the continued US government shutdown could jeopardize the AAA-status the rating agency grants America.  It spurred little market reaction (and for good reason).   First, the rating cut is not imminent, though some of the headlines suggest otherwise.  Fitch's McCormack though was clear:  " If the shutdown continues to March 1 and the debt ceiling becomes a problem several months later, we may need to start thinking...

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Higher Rates Are Crushing Investors

There is an old saying that proclaims, “it’s not the size of the ship, but the motion of the ocean.” Since this is a family-friendly publication, we will leave it at that. However, the saying has a connotation that is pertinent to the bond market today. Much of the media’s focus on the recent surge in yields has been on the absolute increase in numerical terms. The increase in rates and yields, while important, fails to consider the bigger forces that can inflict pain on bond holders, or...

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Monthly Macro Monitor – September

This has already been one of the longest economic expansions on record for the US and there is little in the data or markets to indicate that is about to come to an end. Current levels of the yield curve are comparable to late 2005 in the last cycle. It was almost two years later before we even had an inkling of a problem and even in the summer of 2008 – nearly three years later – there was still a robust debate about whether the US could avoid recession. The answer was, of...

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Why Tariffs will Not Reduce the US Trade Deficit

When trying to work through the impact of US tariffs on its trade balance, one ought to keep in mind Orson Welles caution that if you want a happy ending, that of course, depends on where you end your story.   If one stops with simply the US tax on imports, it should reduce the quantity of imports by raising prices.  One might be tempted to conclude that the trade deficit would fall because of lower imports.   However, the story does not naturally end there.   The higher...

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Global Asset Allocation Update

Note: This will be a short update. We are shifting the timing of some of our reports. The monthly Global Asset Allocation update will now be published in the first week of the month, aiming for the first of each month. I’ll put out a full report next week. The Bi-Weekly Economic Review is shifting to a monthly update, published on the 15th of each month. We are doing this to make room for some new reports, podcasts and videos. The risk budget is unchanged this month. For the moderate risk...

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