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Bond Market Insights - Wed, 19 Apr 2023

Volumes are down, conviction is down, Vix is down.

Housing Starts data came mostly in line, and Fed banter wound up mostly balanced. Bullard is promoting at least 5.5%-5.75% Fed Funds. He also promotes take away most of its forward guidance. Bostic differed. He is in favour of pausing after one more hike.

On the US treasury curve selling persists in off the run 2yr and 5yr bonds, as repo got tight on the currents. The hump in the very front end is July/August 23 which coincides with the beginning of debt ceiling discussions.

The charts for global bonds are looking a bit dicey. as volumes and volatility have left the system. A triangle formation has formed and favours a break out to the upside in yields. JP Morgan's Client Treasury Survey shoes outright longs at 20%,, compared to 11% last week, the most since 24/10/22. IT shows that 60% of clients are neutral vs 72% last week.

Inflation day in Europe, with Eurozone CPI final read for March and UK CPI, which is hoped to come down to 9.8% year on year. In Canada core CPI came in at 4.4% y/y, as expected. Perhaps more interesting is the Canadian civil service union, PSAC, has called for a strike as wage negotiations failed. Inflation’s merry tune continues. Price inflation leading into wage inflation.,

Germany's largest trade union, IG Metall, agreed to a below inflation wage settlement last November,, Remembering how IG Metall dominated headlines in the early 1990's it will be interesting to see how that pans out in 2023

US Wages - CPI

China High Yield was weak today (Wednesday,) down as much as 1pt with better selling in Country Garden and RoadKing. Distressed names remain under pressure. Wanda Properties were unchanged having taken the pain yesterday, when they fell 3 points. Sino Ocean has been hit by as much as 8 points on panicky selling. There is an article from ( equivalent) talking about Sino Ocean potentially approaching investors for restructuring. No vouching for the reliability of this source.



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