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Bad News Is Bad News
Bad news was just bad news on Thursday in the US.
A jump in jobless claims and an abysmal read on ISM manufacturing undercut risk sentiment and sent 10-year yields tumbling below 4%.
Three-handle 10s was a notable development, but shorter tenors naturally rallied harder on Fed cut bets. Twos were ~18bps richer. The front-end's screaming at the Fed to cut, but to be fair, it's been that way for quite a while now.
The figure above's pretty ominous. It was ok when the data was holding up, but.
Curve will continue to steepen/uninvert, bull or bear. Hey remember the trump trade. Don’t hear much about that from the talking heads now huh?
I’m thinking NFP comes up short, possibly even negative tomorrow. Primarily the guess is based on the premise that recent NPFs have diverged from other data due to migration. Supposedly, border crossings are at trump area lows right now, thus no migration bump in July data and likely downward revisions in prior months.
BTW- There’s a new (to me) concept of vibecession which essentially identifies that people are processing so much mental angst right now with the constant negative messaging from political campaigns that it is suppressing customer behaviors especially those at the lower end of the economic spectrum. If this is really impacting the economy, we have an end date, Nov 5. Plus, I expect Biden to get the Child tax credit passed again post election further aiding an economic rebound.
I still think we see new insane ATHs next year.
Surprising to everyone except those of us who’ve been looking for work for a year and a half.