TRACKRECORD DAILY
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TRACKRECORD DAILY

Are we out of the woods yet?

There will be a $24 billion US Treasury 30-year bond auction later today, and if it turns out well, the stage will be set for risk assets to continue to recover strongly from here.

MARKET OBSERVATION

A Tale Of Two Worlds

While John Kerry, diplomat serving as the United States Special Presidential Envoy for Climate, encourages the oil industry to “speed up its transition to fight climate change”, we have Total’s President of Strategy and Innovation calling for a 10 million barrel per day gap in supply between now and 2025 (from Total’s annual results, chart below):

DAY AHEAD

ECB Meets

The ECB is most concerned about the rise in US rates. From its perspective, this is mainly an American story that is spilling over into Europe for no good reason. The US is vaccinating its citizens quickly, and there’s a storm of federal spending coming to heal the economy. This is pushing US yields higher as Fed rate hikes are brought forward, which is spilling over into European yields.

TRADING PLAN

1. Currencies : Keep short USD and long NZD, & CNH. USDCNH came off hard from 6.55, the level to add to shorts. Stay with it.

WHAT HAPPENED YESTERDAY

As of New York Close 9 Mar 2021,

  • The U.S. Dollar Index fell -0.2% to 91.79. Dollar edged lower on Wednesday following a tame U.S. inflation report and a benign auction of benchmark 10-year Treasury notes, while riskier currencies like the AUD and NZD rose on improving global growth prospects. The Bank of Canada on Wednesday left its key overnight interest rate unchanged at 0.25%, as expected, and said the Canadian economy was proving to be more resilient than anticipated to the second COVID wave and containment measures.
  • The 10-yr yield decreased 2 basis points to 1.53%, with the market showing little reaction to the tepid $38 billion 10-yr note auction in the afternoon, which though was a touch weak but was better than feared after last week’s disastrous 7-year auction. The 2-yr yield decreased 1 basis point to 0.16%. This was a case of slightly bad news being seen as good news.
  • S&P 500 advanced +0.6% on Wednesday, as value and cyclical stocks reclaimed their recent leadership roles and inflation concerns were put on hold. The pro-cyclical trade disproportionately benefited the Dow Jones Industrial Average (+1.5%) and Russell 2000 (+1.8%), with the Dow setting intraday and closing record highs. The Nasdaq 100 (-0.04%), however, closed slightly lower after being up as much as +1.6% intraday. The S&P 500 information technology sector (-0.4%) and Philadelphia Semiconductor Index (-1.8%) were other growth-stock pockets of weakness.

HEADLINES & MARKET IMPACT

Biden’s $1.9 trillion COVID-19 bill wins final approval in House

Notable Snippet: The U.S. House of Representatives gave final approval on Wednesday to one of the largest economic stimulus measures in American history, a sweeping $1.9 trillion COVID-19 relief bill that gives President Joe Biden his first major victory in office. The measure provides $400 billion for $1,400 direct payments to most Americans, $350 billion in aid to state and local governments, an expansion of the child tax credit and increased funding for vaccine distribution. Forecasters expect it to supercharge the U.S. economic recovery. Approval by a 220–211 vote in the Democratic-controlled chamber came with zero Republican support after weeks of partisan debate and wrangling in Congress. Democrats described the legislation as a critical response to a pandemic that has killed more than 528,000 people and thrown millions out of work.

Australia unveils $928 million coronavirus support package to revive airlines, tourism

Notable Snippet: The Australian government unveiled a A$1.2 billion ($928 million) tourism support package on Thursday, aimed at boosting local travel while international routes remain closed because of the coronavirus pandemic. The government will subsidise 800,000 tickets on domestic flights to 13 destinations around the country that mostly rely on international tourists, and offer cheap loans to small tourism operators. Qantas hopes to resume some international flights by the end of October, when Australia expects to complete its national COVID-19 immunisation drive

SENTIMENT

FX

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