Bonds, Curves, Policy and Groundhogs
What do they have in common?
A Current View Brief on Conditions, from:
The Distilled Perspective
By Patrick T Bulger
Keeping it simple, The Data:
More to come on the news flow of the last 18 hours...stay tuned.
Condition of collateral....
The street has higher amount of collateral issued at low rates.
Pressures are similar to the past 3 recessions.
2001, 2007, & 2020. Don't forget your Wu & Xia.
2020 from our distilled perspective, was a qualified recession.
Flow of events,
Downgrade of US debt rating, real, yet,
Downplayed by many.
Question: Who will be the one to downgrade from here?
The situation is not getting better.
Rates Up (Many Factors in Play).
Debt still rising (Supply).
Global Trade Collateral less robust (Demand).
The Dump (Debt) Truck is getting bigger,
The wheels are looking like bicycle tires.
Distortions
Issuance overload to the short end of the curve appears to have shifted the traditional pivot of 10 year notes, toward the 2 year bill.
This would also give some distortion to traditional spreads...
The algo may only be as dependable as those running the shop.
This is all before getting to domestic & global conditions of:
Banks, Balance Sheet Capacity, Buffered, Synthetic, Bundled, Collateralized, Leveraged, Rehypothecated, Refinance
It's neither a flat earth,
Nor static risk condition.
Music Over?
Turn out the light...?