Posted May 30, 17:08

Yen Tracking Yield Spreads again?

Yen Tracking Yield Spreads again? Chart
May 30: 

During yesterday's sleepy markets, I highlighted in this tweet the rally in bund futures (rising prices, falling yields) may signal similar price action at the subsequent session, when US bond yields/prices return from Memorial Day Weekend. Today's bond price action did not disappoint, as the homogenous asset class moved in concert, delivering gap ups in prices and falling yields. This was a desperately needed development for yen bulls (particularly USDJPY shorts). Interpret what you wish from the chart below as to which is the dependent and independent variable (USDJPY or yield spread). Who leads whom?  Shorting USDJPY has been the "pain trade" for our WhatsApp Broadcast Group, as we await Wednesday's debt ceiling vote and the JOLTs survey. Hanging in there. 

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Charts' Year to Date Performance May 29, 2023 16:23: 

As the focus falls on AI, Tech and yields, cryptos are making a solid comeback. Aside from Wednesday's Congressional vote on the debt ceiling, keep your eye on the ball, namely the crucial JOLTS report, ISM and the all important NFP +AHE. What used to be +50% odds of 3 rate cuts in H2 is shifting to a possible rate hike in June careful.  


What's a Cycle Completing Trade? May 19, 2023 18:50: 

Before I mention complete-the-cycle trade, I need to address Powell & the Fed. Seeing Fed chair Powell speaking today on a panel next to Ben Bernanke struck me how much more transparency, communication, forward guidance and all sort of other means of reaching out to the public has emerged from the Federal Reserve, compared to the Bernanke days nearly a decade ago. But even with the improved communication and policy tools (forward guidance helped lift yields before the start of rate hikes), the Fed remains in the dark and with reduced firepower. Here's why and how.