We’ll Have To Wait And See.

Wednesday was one of those days where everyone was still kind of trying to figure out what to make of the previous session and today that meant pondering the future for various assets under a scenario where 10Y yields in the U.S. continue to rise.

Here’s what $643 billion in AUM thinks:


Basically, Trump’s foreign policy mantra applies: “we’ll have to wait and see.”


All-time highs for small-caps:


Don’t ask “Main Street” what’s going on because they clearly don’t have a clue:

Yields came off their Tuesday highs initially, but then, Treasurys cheapened anew with yields on 10s higher by 2bp and the rest of the curve up some 1.5bp.


But the story of the day in bond land was obviously 10Y yields in Italy, which spiked a truly harrowing 16bps as jitters about the prospect of a populist government and reports that part of the “plan” is a request for a €250 billion debt write down from the ECB spooked the hell out of bond investors (much more on that here):


The euro fell and is still sitting at its lowest levels since December:


Italian stocks were crushed although the rest of Europe help up well. You can see the performance disparity gapping wider on the week:


The dollar was slightly higher. It’s worth panning back out to capture Tuesday’s retail sales, as that was the catalyst for the bond selloff:


Oil reacted to inventory data in the U.S. (crude, gasoline and distillate draws). Notably, as Bloomberg detailed, “crude exports rose 37% to 2.57m b/d last week, the highest volume since the EIA began weekly data collection in August 1993.”


The Turkish lira – which hit another all-time low on Tuesday after Erdogan told Bloomberg TV that he’s going to take over the central bank (basically) – got some relief on Wednesday on central bank jawboning and a meeting between Erodgan and Cetinkaya which turned out not to be about the lira (although you damn well know it came up). Here’s what CBT said:

[We are] closely monitoring the unhealthy price formations in the markets. Necessary steps will be taken, also considering the impact of these developments on the inflation outlook.

Who knows what that even means because remember, according to Erdogan tighter policy drives inflation higher. Anyway, here’s the lira on the day – absurd:


Speaking of currency crises, the Argentine peso reversed a rally tied to the “successful” roll of short-term debt on Tuesday.

Apparently, Michael Hasenstab, CIO of Franklin Templeton’s global macro team, bought some 75% of 73b pesos in Botes sold yesterday. That according to FT. To wit:

Franklin Templeton’s Michael Hasenstab came to Argentina’s aid this week, lending Buenos Aires more than $2.25bn in a discrete cash infusion reminiscent of the bond fund manager’s support for Ireland in the wake of the eurozone crisis. Funds controlled by Mr Hasenstab, including the flagship $38bn Templeton Global Bond Fund, snapped up more than three-quarters of the 73bn pesos ($3bn) in “Bote” bonds sold by Argentina on Tuesday, according to people familiar with the matter. The Argentine government only “reopened” the Bote bonds maturing in five and eight years for a sale after being approached by Franklin Templeton, which was already a big Argentine bondholder, according to a person close to the deal.

Who knows what to make of this right now. All we do know is that the peso reversed its gains to trade lower on Wednesday. This is a joke:


I guess if you’re out to try and play this somehow and you don’t have a couple of billion laying around to offer up to a desperate government via what amounts to a private placement, you can try the  Global X MSCI Argentina ETF (it saw $17 million in outflows last week and a total of $35 million YTD):


Finally, for your moment of zen, here is Trump explaining the difference between “people” and “animals”:

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