‘Things Aren’t Falling Apart, But’ – Dismal Auto Sales Unleash Treasury Rally

So it’s been readily apparent for at least two years that the US auto sales “miracle” wasn’t sustainable and that, at least to a certain degree, some the “renaissance” was attributable to subprime lending.

Currently, there are all kinds of questions about whether subprime auto paper is the next “Big Short.” For her part, Citi’s Mary Kane has been on a one-woman crusade to dispel that notion for as long as I can remember. If you’re in need of some Tuesday comic relief, you’re encouraged to check out the Mary Kane saga in all its glory here (just scroll through the posts and pick whichever one you think sounds the funniest – you won’t be disappointed).

Well on Tuesday we got the latest read on auto sales and it wasn’t great. Ford, GM, and Fiat Chrysler all missed by a hefty margin.

Estimates:

Estimates

Actual numbers (via Bloomberg):

Sales

Autotrader’s Michelle Krebs offered the following rather uninspiring assessment when contacted by Bloomberg for comment:

Things aren’t falling apart, but they are definitely falling from the peak.

Right.

This of course paves the way for (more) discounting, etc. etc. All deflationary.

These numbers started to come in around 9, and that promptly unleashed a rally in Treasurys which, now that it looks to have some legs, you should probably take note of:

Yields

That’s the lowest in a week for 10Y yields:

Yields2

And bunds went along for the ride (get it?):

Bunds

“While it’s too soon to conclude autos are a canary for Q3 weakness, traders are on guard for the possible interplay of tougher credit conditions and reduced durable goods sales,” FTN strategist Jim Vogel said in note.

Thanks, Jim.

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