Greetings,

We begin with the results of our Bond Selloff survey (by Matt Garrett) where we had 1,512 participants. 

1. What was the top contributor to the September global bond selloff that saw US 30yr yields rise >25bps in a week?

We've received a number of comments on this first question. Here are some of them. A. I took the survey on the bond market correction, but was disappointed not to see the BoJ in any of the answers. Their focus on steepening the curve has likely had more influence than the Fed and should have more influence in the week ahead, too. See Fig 2 below (from our FX Atlas).
 
Cheers,
Jeff

B. I think the survey should have an "other" option with space for description.

For the first question, I think signals that the BoJ will take action next week to steepen the JGB yield curve is behind the selling of the long end. It's somewhat related to general sense that BoJ and ECB are running out of options to decrease rates further abut the catalyst I think is people expecting the BoJ to do that. 

Best
Scott 

C. I have done your survey but I think the real reason for the selloff could be Henkel and Sanofi issuing bonds at negative rates [these are European corporate bond issuers]. Sometimes things stay ridiculous for an extended period and then suddenly the market wakes up to reality. The trigger is often just the credibility elastic being stretched that bit too far and I think this was one of those situations. Not really a crowded trade as the crowd is central banks, and nobody buying this believes that they are making a rational investment.

Cheers
Steve

2. What will global yields do in the remainder of 2016?

3. At their September meeting next week the Fed will

1. Next, let's look at emerging markets where Mexico's government bond yield has been on the rise.

2. The FT points out that the peso continues to be driven by Donald Trump's election odds (as Trump's polling improves, the peso weakens). Perhaps.

Source: @fastFT; Read full article here

3. Brazil's real GDP indicator missed forecasts. Here is a comment/chart from Goldman.

Source: Goldman Sachs

4. Russian bond yields continue to rise in response to the central bank's pause in rate cuts (discussed yesterday).

5. Russian real household disposable income is collapsing.  With the consumer under pressure, retail sales continue to decline (second chart below).

Source: Tradingeconomics.com

6. Ukraine finally pulls out of its terrible recession. Is the recovery sustainable?

7. The Saudi stock market is selling off again.

Source: barchart.com

Saudi bank shares have been especially weak. This comparison (below) does not bode well for crude oil. Unlike in the US, however, tighter credit is probably not going to impact (government-sponsored) oil production much.

Source: @Matt__J, Bloomberg

One of the reasons for the selloff is that the Gulf nations’ banks are facing a bit of a liquidity crunch. The chart below shows the loans-to-deposits ratio.

Source: @business; Read full article here

8. Related to the above, here is the Qatar stock market. 

9. The IMF bailout of Egypt will probably require a floating exchange rate which will result in a devaluation. Markets are betting on roughly 12% decline in the next month.

10. Modi remains quite popular in India (a favorability rating unseen in the US).

Source: @pewglobal, @Tmp_Research; Read full article here  

1. In Asia, bond yields are moving higher. Here we have the South Korean 30yr bond yield.

Australian yields are grinding higher as well.

2. It's becoming prohibitively expensive to be short the renminbi in Hong Kong as the CNH (offshore yuan) borrowing costs spike again.

Source: analystz.hk

1. In Central Europe, Poland's industrial output recovers. However, the nation's construction activity continues to languish.

2. S&P upgraded Hungary's rating, sending bond yields lower.

Source: S&P Global Ratings

3. Slovakia's government cut growth projections, blaming Brexit-related effects on exports.

Source: @economics, Read full article here 

In the UK, the sterling’s real effective exchange rate suggests the currency is undervalued again.

Source: Natixis, ‏@joshdigga (this is supposed to say "once again")

This GBP weakness is expected to help the nation's manufacturing and other export-oriented sectors significantly.

Source:  @auaurelija, ‏@joshdigga  

1. In the Eurozone, construction output rose as building construction and civil engineering activity improved.

Further Reading

2. Here is the breakdown of the Eurozone's industrial output (discussed yesterday).

Source: Natixis, ‏@joshdigga

3. Deutsche Bank remains under pressure: here is the stock price, CoCo yield, and CDS spread over the past few days.

4. The ECB's corporate bond buying accelerates.

Source: @FT; Read full article here

5. Here is what happened since the ECB's announcement of no stimulus acceleration.

Source: Derek Holt (@scotiabank), ‏@joshdigga

Next, we go to the United States where US homebuilder optimism rose to an 11-month high on tight housing inventories. Homebuilder shares, which have underperformed sharply in recent days, moved back into the black for the year in response to the NAHB report.

Source: YCharts.com

2. As a result of the above report, the Citi US Economic Surpise Index moved back into positive territory.

3. Traditional metrics suggest that the Fed should be raising rates. But these days indicators such as the dollar, inflation expectations, financial conditions indices, etc. may be more important.

Source: @KateDavidson, @BenLeubsdorf,  ‏@Tmp_Research; Read 

4. The US Truck Tonnage Index hits a new record (through July).

5. Google search frequency for the word "unemployment" is now below the 2004-07 average.

 

 

6. Is the US household deleveraging trend ending?

Source: @jsblokland

1. In the funding markets, US LIBOR rates are grinding higher.

2. There is even some tightness in the secured (term) financing markets. Here is the 3-week US GC repo rate.

In credit markets, US leveraged finance issuance is picking up again.

Source:  ‏@lcdnews; Read 

According to FactSet, the "S&P trailing 12-month sales growth has broken positive for the first time in a year."

 

Source: @FactSet

As discussed before, bond-equity correlations have risen sharply - both in the US (chart below) and globally (second chart below).

 

Source: JPMorgan, @NickatFP

 

Source: ‏@fastFT, Read 

1. In commodities, wheat market participants are trying to pressure Egypt (the largest single wheat importer) to loosen some of the auction rules.

Source: @markets; Read 

2. The relentless "bacon deflation" continues. It's interesting that pork on the retail side has not declined nearly as much, although demand has been soft.

3. The palm oil futures rally has resumed.

4. European natural gas bounced 5% on Monday.

Source: ICE

1. Turning to Food for Thought, here is a comparison of how India, the US, and the EU view their role in the world.

 

Source: ‏@pewglobal, @Tmp_Research, Read 

2. Who says radio is dying?  The chart below shows the number of US low-power FM radio stations - which has almost doubled since 2014.

 

Source: @FactTank, @Tmp_Research; Read 

3. Fast food sales are slowing because the cost of eating at home has been declining.

 

Source: @chartoftheday, @Tmp_Research; Read 

4. Olympics vs. Paralympics.

 

Source: @ECONdailycharts, @Tmp_Research; Read 

5. Value system for different countries. Notice, for example, how individuals in different countries value "work".

Source: @paul1kirby, @knoema, @Tmp_Research; Read