We begin with the United States where some analysts argue that there should be no reason for the Fed to hike because short-term rates have already risen - quite substantially. Here is a quote/chart from DB.

Source: @DeutscheBank's Torsten Sløk, @MattGarrett3

Source: @DeutscheBank's Torsten Sløk, @MattGarrett3

Indeed, LIBOR rates continue grinding higher and the TED Spread has widened sharply.

 

At the same time, (as discussed before) US economic data has been soft. Here is a chart from a Daily Shot reader showing durable goods shipments (year-over-year). It's hard to see how the FOMC would ignore this.

h/t James

1. In other US developments, new residential construction report was quite disappointing. The chart below shows new construction permits.

The number of single-family units that started construction was especially weak.

The weakness has been blamed on flooding in the South. Does that also explain soft housing permits data?

Source: Reuters; Read full article here

2. The growth in the Johnson Redbook same-store sales index remains at the weakest levels since 2009. Part of this has to do with the shift in US retail landscape. Nonetheless, this is not a helpful trend for US retail sales.

Source: Investing.com

3. The Fed's measure of the US tech sector's health is gradually trending higher.

4. The next chart shows the contribution to US job creation by company age.  Newer firms have been big job creators but the trend is not promising (in part because there are fewer new firms).

Source: BofAML, @joshdigga​

1. Turning to Japan, JGB yields jumped on the BOJ's announcement. The 10y bond yield moved above zero for the first time since February. Dollar-yen rose (yen weakened). More on the BoJ tomorrow.

Source: Goldman Sachs, @joshdigga

2. The next two charts demonstrate the pressure on the longer-dated JGBs. The BoJ has been buying less of the "super-ling" bonds, while Japan's government has been increasing the duration of its issuance.

Source: Goldman Sachs, @joshdigga

Source: Goldman Sachs, @joshdigga

3. Separately, Japan's exports continue to slide, with the latest figures missing estimates.

1. Now on to the Eurozone, where the central bank balance sheet is rapidly expanding.

Source: ECB

2. To add to the ECB's challenges, Germany will be issuing less debt than originally expected.

Source: Reuters; Read full article here

3. Related to the above, as the markets digested the fact that there is a shortage of government debt out there, yields around the world stabilized - for now. Here is the Italian 10yr bond. We will see how BoJ's decisions carry over into European markets.

4. Deutsche Bank remains under pressure, with shares giving up nearly 4% on Tuesday. Deutsche's CoCo's continue to sell off.

 

Source: Bloomberg

Deutsche Bank's CDS spreads keep rising, pushing Germany's sovereign CDS spread higher as well. The charts below show the relationship in terms of default probabilities.

Source: @Schuldensuehner

5. Banca Monte dei Paschi di Siena shares are finding no bid, giving up another 6.4%. This trend is not sustainable. The Italian government, however, is unable to directly provide taxpayer support to this and other institutions without a "bail-in" - forcing subordinated debt holders to take a haircut. In Italy, many of these subordinated debt holders are retail depositors - it would be a political disaster to hit them with losses on what they thought were "high-yield deposits." 

Here is the evolution of impaired debt in the Italian banking system.

Source: Fitch Ratings, @joshdigga

6. The Italian referendum polls have been all over the place, adding to further political risks.

Source: Natixis, @joshdigga; Further Reading

Goldman points out that CEEMEA (Central & Eastern Europe, Middle East & Africa) unemployment rates have fallen below historical averages. Here is the breakdown for some of the larger economies in this group.

Source: Goldman Sachs, @joshdigga

The British pound fell below $1.3 again. Will this currency weakness push up inflation in the UK?

1. In emerging markets, Mexico's bond yields continue to rise as the peso hits record lows vs. the dollar. The central bank seems to be MIA.

 

2. The spread between the 2 and 1-month USD/MXN implied volatility has been elevated as a result of the Donald Trump bet (the difference in pre- and post-election option premium).

3. S&P Global downgraded Brazil's State of Rio de Janeiro to "defaulted". Here is the summary statement.

Source: S&P Global

4. Kenya's central bank cut rates, as the nation's credit growth slowed sharply.

Further Reading

5. As discussed yesterday, Russian bond yields are grinding higher.

1. Turning to credit, global jumbo deals ($5bn or larger) have been on the rise.

Source: @FT, Rad full article here

2. Some models, which take into account default probabilities, suggest that US corporate high-yield credit has been overvalued. Here is an example.

Source: @LCDhybonds, @Callum_Thomas​, Read full article here

1. In US equity markets, biotechs are riding high again on Allergan's acquisition activity.

Source: @MaxNisen, Rad full article here

Source: YCharts.com

2. FedEx earnings report beat expectations. This, combined with the trucking volume index (from yesterday), is a positive sign for the US economy. 

Source: Google

3. On the other hand, retail shares are under pressure again, which is consistent with the weakness in the Redbook Index (above).

Source: YCharts.com

1. In commodities, China's stockpiles of steel are on the rise again, which does not bode well for iron ore prices.

h/t Goldman Sachs, @joshdigga

h/t Goldman Sachs, @joshdigga​

2. Gold volatility has collapsed ahead of the FOMC's decision.

Source: @markets, Read full story here

3. Coffee futures jump in response to slowing global exports.

Further Reading

4. Manganese futures in China are rallying. More on this later.

4. US natural gas rose above $3 on warm weather as Americans turned their air conditioners back on.

Further Reading

5. Palm oil rally has accelerated.

6. US grain prices seem to have stabilized - for now.

1. In global developments, here is who holds domestic government bonds for various nations.

Source: Deutsche Bank, @MarkusEconomist

2. QE has been profitable for many governments as central banks pay out the profits on their securities holdings.

Source: WSJ, Read full article here

1. Turning to Food for Thought, here is how long (on average) each nation's representatives speak at the UN.

Source: ‏@ECONdailycharts, Read full article here

2. Continuing with the UN, here is how different nations view the organization. The second chart below shows how US party affiliation translates into attitudes toward the UN.

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

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

3. Household incomes by state.

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

4. According to the Peterson Institute for International Economics, this would be the impact of a full trade war with Mexico and China on the US job market.

Source: @PIIE @KentBoydston; Read full article here

5. Nigeria's population will overtake the US in a few decades.

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