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‘Boom!’ Nomura’s McElligott Talks Possible Breakdown In ‘Bond Love Affair’ Ahead Of ‘Ides of March’ Risk For Stocks

"... it sets up a dangerous dynamic where 'late-comers' are forced-in.""

"... it sets up a dangerous dynamic where 'late-comers' are forced-in.""
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6 comments on “‘Boom!’ Nomura’s McElligott Talks Possible Breakdown In ‘Bond Love Affair’ Ahead Of ‘Ides of March’ Risk For Stocks

  1. Plain talk would be greatly appreciated. I think you are saying that its a fools errand chasing the equities and going long at this point. Therefore, sell a bunch and hold a little? Or go away before May? And fahgettaboutit with bonds altogether? I will be happy to think about whatever facts there are that have a high level of certainty and veracity. Thank You for your nascent clarifications and expeditious, timely expoundments.

  2. I agree with his assessment of perception in the bond market. But I think the equity markets are reflecting the view that there will be growth without inflation. That’s a slight nuance, but could account for both markets rising. The problem with that view is that if might be a way to thread the needle with mild growth. But if the growth is mild, how much upside is there in equities? If growth is strong, how does the bond rally continue?

  3. Everybody wants a happy ending, but the bond market still isn’t happy.

    Why? Because nobody in one’s right mind outside of China wants yuan in exchange for goods and services. A single weekend isn’t going to change that fact.

    • That and the US/DPRK peace talks collapse might be negatively impacting Japanese sentiment for US government securities…

  4. Last August, when I first encountered the Heisenberg phenomenon, the topic du jour was a troubling spike in 10y US Treasury yields, which (H opined at the time) was sometimes correlated with corrections in the equities market. A little spike is a good thing (traders interpret this as money flowing from bonds to equities), but a spike of more than 1 standard deviation, can cause sentiment to change as the perceived narrative shifts: people are going to cash!

    Well, look what we see over the past week in US10Y yield:
    https://www.tradingview.com/x/WyJyMkro/

    It’s riding the edge of its envelope again, just as it was in August, then September, then October.

    Conditions are different this time: the UST yield curve is steepening, not flattening; there’s a love affair with corporate debt (but evidently not US government debt, as bond yields have been rising across the board all week). Could the signal have the same meaning? Irrespective of McElligott’s (always colorful) opinions, what I see in the bond market certainly doesn’t incline me to take risks with equities just now.

    • Maybe the biggest unreported story of the week. Santelli mentioned it on CNBC on Friday.

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