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This Is ‘The Most Critical Level In Global Markets’
If you had to choose just one level to watch across the entire global markets universe, what would it be?
One candidate, according to Nomura's Charlie McElligott, is 127 on 10-year Treasury futures. "The Street is short just a massive amount of downside struck there in TYH2 Puts, with 321,729 of OI," he wrote Tuesday, as US market participants came back from a long weekend to more rates-related turmoil.
Although 10-year yields initially receded after hitting 1.85% (as expectations for aggressi
“The rates vigilantes”? More like the speculative wolf pack piling into a hot trade.
Agreed
The interesting question is, if markets did break this/other critical levels and start really tumbling (the recent -4% on SP500 is not a “tumble”) can the Fed pull back from its tapering-tightening course? I think not – Fed has to start down that path, and the econ data that could give it an “out” would be eye-popping indeed.
The Fed is committed to the taper and a 25bps hike in either March or June- likely March now. After that who knows?
Thought experiment: between now and April, inflation declines 2-3 ppts from recent readings, ISM and other cyclical indications weaken meaningfully, new jobs slow but gap between openings and hires remains as wide as now, company earnings weaken, SP500 declines to 4300 – what will Fed signal in April, presuming it delivered the expected 25bp hike in March?
Shooting from the hip, this is where we are going. Time to find your magic 8 ball.