The Financial Times – Wall Street bond traders fear zero-bonus ‘doughnut’ The weak performance from bond trading is likely to mean that banks across the industry slash discretionary payouts for people they deem “dispensable”, said Paul Sorbera, president of Alliance Consulting, a search firm. A zero bonus from a stable bank is normally a strong hint that the… Continue reading Disappointing Year For Bond Traders
Handout, mp3 replay and webcast replay of our conference call titled Five Themes to watch in 2018 on December 21, 2017. The handout can be found here (starts with the second post). Mp3 replay can be heard below: Webcast replay below: View PDF
Risk-On Strong “risk-on” flows (ETFs) produces lower financial market volatility than strong “risk-off” flows (ETFs) The chart below measures risk-on/off cycles using BofA’s Global Flow Index, which reveals investor flows between risk and safe assets. As BofA states: The Flow indicator is a measure of investor sentiment for equities, bonds and money markets, calculated using investor flows (data from EPFR) and volumes. Levels greater/less than… Continue reading Risk-On To Risk-Off?
Summary The longest risk on cycle on record continued for a 154th day but a shift to risk off is very likely. Yesterday we looked at a number of markets and equity sectors which showed strong directional biases in the first month of risk off moves. Crude oil and other commodities appear vulnerable to risk-off… Continue reading Sovereigns and Currencies During Risk Off Cycles
Comment The chart below shows the impact of each variable on implied volatility (y-axis) by a generalized additive model. Higher, red lines indicate higher volatility, while lower, blue lines indicate lower volatility. Economic growth across the globe remains staunchly positive, inflation growth on whole remains tepid, and no significant moves are… Continue reading When Will Volatility Return?
Summary Economists and financial markets remain extremely confident in a low inflation and interest rate environment even while expecting improving economic growth. However, we show the differences in inflation forecasts based on financial market returns, economic data, and sentiment are growing wider. Historically, uncertainty has been priced in by bond investors via wider term premium… Continue reading Economists and Markets are Disbelievers in Inflation Ever Returning
The Financial Times – Yellen kept markets calm but 2018 may be rockier Fed officials, economists and traders disagree on the outlook for rates next year Next year is also likely to be an inflection point in global monetary policy. Central banks have swelled their collective balance sheets by about $15tn over the past decade, in… Continue reading Will The Fed Go Too Far And Invert The Curve?
30 Year Treasury Large speculators (second panel) have been buying aggressively since late October. Both large speculators and leveraged traders are at a net long extreme position. Eurodollar Large speculators (second panel) and leveraged traders or hedge funds (third panel) have been selling since early September. The chart below averages the z-score (standard deviation… Continue reading Interest Rates CoT
Is The Dollar Too Hated? Readers of this report will note we have been highlighting the “over-speculated” nature of currencies over the past several weeks. This is another way of saying the dollar is too hated. The first chart below shows the euro. The net position of large specs (second panel) remains near multi-year extremes. This… Continue reading Currencies CoT
On Thursday, December 21, 2017 at 9:30 AM CT (10:30 AM ET, 7:30 AM PT and 15:30 GMT) Bianco Research, in conjunction with Arbor Research & Trading, will be hosting a webinar/teleconference moderated by Jim Bianco. Please join us Thursday as we discuss things to watch in 2018. 1. When will the record risk-on period end?… Continue reading Conference Call Thursday – Five Themes To Watch In 2018
TheStreet.com – Global Fund Managers’ Survey Shows Cash Increasing, Tech Sector Weights Slipping Tech sector allocations slipped to the lowest in 3.5 years this month, according to Bank of America Merrill Lynch’s benchmark fund manager’s survey. The net share of respondents in BAML’s monthly poll of 172 investment managers — who run more than half a… Continue reading What to Expect in a Shift to Risk-Off