bond market

Last year, Katie and Ethan made a bet about when the Fed would cut interest rates. Today, as the first quarter ends and markets flatten a bit, it’s time for one of them to eat crow. As for the other, he or she will gloat, but in a measured, slightly backpedalling way that won’t be too embarrassing in the future. Also, we go long Liz Truss’s PR manager and short cicadas. 

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Follow Ethan Wu (@ethanywu) and Katie Martin (@katie_martin_fx) on X. You can email Ethan at ethan.wu@ft.com.

Read a transcript of this episode on FT.com

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Today, we’re discussing the bond market’s big reaction to the latest inflation news and why you shouldn’t worry about it. Plus, a new Boeing whistleblower comes forward, and Beyoncé calls out the home insurance industry.

Here’s everything we talked about today:

• • “Bonds are talking to us after inflation gauge comes in above forecasts” from Marketplace

• • “US consumer prices heat up in March; seen delaying Fed rate cut” from Reuters

• • “$6.6 billion TSMC deal in Arizona the latest in the CHIPS Act’s rollout” from Marketplace

• • “TSMC: Biden to give Taiwanese company $6.6 billion to ramp up US chip production” from CNN

• • “Biden administration bets an old plant can make new chips” from Marketplace

• • “‘Benefit of the doubt running thin with Boeing’: Capt. Dennis Tajer on whistleblower claims” from CNBC

• • “Boeing whistleblower says the Dreamliner 787 could ‘break apart’ because of safety flaws, report says” from NBC

• • Beyoncé’s YA YA (Clean Version)

• • Video breaking down Beyoncé’s “YA YA” from Daryl Fairweather on X

Join us tomorrow for Economics on Tap! The YouTube livestream starts at 3:30 p.m. Pacific time, 3:30 p.m. Eastern time. We’ll have news, drink, and play a round of Half Full/Half Empty.

Harley Bassman, a.k.a. the Convexity Maven, is a legend among bond investors. He worked at Merrill Lynch, where he invented the MOVE Index that measures bond market volatility, and then at Pimco. Now, after a dramatic year for US Treasuries that saw investors hit with massive amounts of volatility only for the 10-year yield to basically wind up where it was at the start of 2023, he sees things starting to get a bit more normal. With the Federal Reserve getting closer to its 2% inflation target, the yield curve is going to steepen after years of intense inversion, he says. Now a managing partner at Simplify Asset Management, Bassman also talks about his favorite trades for 2024, Fed Chairman Jerome Powell's legacy, and how he chooses his famously esoteric chart colors.

See omnystudio.com/listener for privacy information.

• State pension top-ups are in dire need of an overhaul by DWP and HMRC, says TANYA JEFFERIES
• 
  
• What does the bond market sell-off mean for your investments and pension?
• 
  
• UK bond yields at 25 year high: Global borrowing costs rocket in debt market rout
• 
  
• Premium Bonds winning numbers - and latest news
• 
  
• Our neighbour's CCTV is recording us: Can we make them take it down?

Government bonds are considered the world's safest asset, setting the "risk-free rate" against which all other investments are judged. But with rising national debts and dwindling credit ratings, are they really above question?

We discuss the implications for investors if government bonds are actually at risk of default.

And in today’s Dumb Question of the Week: Why choose bonds over simply holding cash?

Selected links

• Aswath Damodaran Twitter thread
• In Search of Safe Havens: The Trust Deficit and Risk-free Investments! (Aswath Damodaran)
• The Bond Bear Market & Asset Allocation (A Wealth of Common Sense)

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Disclaimer

This podcast is for informational and entertainment purposes and is not financial advice. We do not provide recommendations or endorse any decision to buy, sell or hold any security. We cannot be held responsible for any actions listeners may take and investors are encouraged to seek independent financial advice.

Copyright 2023 Many Happy Returns

In the past week, the bond market has experienced a historic selloff. Yields on benchmark 10-year US Treasuries soared towards 4.9% while those on 30-year debt reached the highest since 2007. But the exact cause of these dramatic moves in the most important market in the world aren't entirely clear, with people looking at everything from the Federal Reserve's outlook for interest rates, to the the jump in the price of oil, or booming supply as the deficit expands, as well as more technical things like the term premium. So what's driving the selloff and how do we disaggregate interrelated things like supply and demand? How do you decompose longer-term and short-term factors feeding into the price of US Treasuries? What can stem the big moves? And what are investors saying about their appetite for US debt? We speak with Jay Barry, co-head of US interest rate strategy at JPMorgan Chase, about the big bond market selloff.

See omnystudio.com/listener for privacy information.

For those who can't get enough Odd Lots, we're now offering you... "Lots More." This new podcast show, appearing on Fridays, will see hosts Tracy Alloway and Joe Weisenthal chatting with some of your favorite Odd Lots guests about the latest breaking news and the biggest themes on their minds in markets, finance and economics. Joe’s away for this episode. So Tracy gathers two of her favorite Bloomberg colleagues — Matt Levine and Mike Mackenzie — to talk about the basis trade that’s got regulators worried, plus the recent bond market selloff, reminiscences over Tokyo in the 1990s and much more.

See omnystudio.com/listener for privacy information.

Your morning briefing, the business news you need in just 15 minutes.

On today's podcast:
(1) The Bank of Japan steps into the bond market, using its new rules to influence rates.

(2) Weak economic data in China fuels hopes for more government intervention.

(3) FX volatility jumps after monetary policy moves, with traders looking ahead to the Bank of England.

(4) Britain's young people face a grim mix of housing costs, poor jobs, and heavy debt. 

See omnystudio.com/listener for privacy information.

BP has started pumping crude through a new $9bn offshore platform as it slows its transition out of fossil fuels, global equities have recovered from the banking crisis but risks remain, and experts are sounding the alarm over the latest version of Open AI’s artificial intelligence chatbot ChatGPT.

Mentioned in this podcast:

BP commits to Gulf of Mexico as $9bn platform comes online

OpenAI’s red team: the experts hired to ‘break’ ChatGPT

The FT News Briefing is produced by Fiona Symon, Sonja Hutson and Marc Filippino. The show’s editor is Jess Smith. Additional help by Peter Barber, Michael Lello, David da Silva and Gavin Kallmann. Topher Forhecz is the FT’s executive producer. The FT’s global head of audio is Cheryl Brumley. The show’s theme song is by Metaphor Music. 

Read a transcript of this episode on FT.com

Hosted on Acast. See acast.com/privacy for more information.

Alf is the former head of a $20B investment portfolio, a passionate global macro investor, and the author of a free newsletter called, “The Macro Compass," available on Substack.

On this episode, Alf helps us understand macro in a digestible way. What’s in our potential future? How bad will it hurt? How long will it last? Answers to these questions and much more in the interview.

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Topics Covered

0:00 Intro
8:00 What to Know About Macro
11:03 Tiers of Money
13:07 Deflationary Timeline
15:20 The Housing Market
17:33 The Inflation Remedy
19:54 Indicators
23:10 Global Credit Impulse Cycle
30:25 Can We Have a Soft Landing?
34:50 How Bad Will This Hurt?
39:29 Volatility in the Bond Market
52:18 Switching to Crypto Assets?
55:57 DXY
1:02:09 Bond/Crypto Market Cycles
1:05:30 What Will Make the Fed Pivot?
1:09:36 The Long-Term
1:15:45 Probability & Adapting
1:19:08 Generating Productivity
1:22:27 The Internet’s Unlock
1:23:40 Why Macro is Important
1:25:40 Action Items & Disclaimers

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Resources:

MacroAlf
https://twitter.com/MacroAlf 

The Macro Compass
https://themacrocompass.substack.com/ 

Is It 2021 Again?
https://themacrocompass.substack.com/p/back-to-2001#details 

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Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research.

Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets. See our investment disclosures here:
https://www.bankless.com/disclosures 

No, no, don't worry, the Odd Lots podcast isn't coming to an end. But for actual odd lots -- trades of securities in unusually-sized increments -- it's the end of an era. Some major banks announced recently that they're getting rid of their dedicated odd lots desks. On this week's podcast, we speak with Chris White, the CEO of ViableMkts and BondCliQ about market structure, and why these changes are taking place.

See omnystudio.com/listener for privacy information.

Longtime market analyst Ed Yardeni came up with the term "Bond Vigilantes" to describe the way bond market participants can punish governments who run economically irresponsible policies. When Yardeni used it in the 80s, it referred to US fiscal policy that was thought to be inflationary. Now the bond vigilantes are back, but this time they're in Italy. On this week's podcast, Yardeni explains the history of the term, what's going on now, and how interest rates can be used to model stock market valuations.  

See omnystudio.com/listener for privacy information.

The stock market is currently in one of its longest bull markets ever, but that doesn't hold a candle to what's going on bonds. According to Paul Schmelzing, a PhD candidate at Harvard and a visiting researcher at the Bank of England, you have to go back more than 500 years (!) to find a bull market in bonds longer than than the one we're experiencing now. After bonds tumbled since last summer (especially since the election) there's a lot of interest in whether we're on the cusp of a major downturn. In this week's Odd Lots, Schmelzing walks us through the history of bull and bear markets in bonds and explains why we could see some gigantic losses ahead.

See omnystudio.com/listener for privacy information.