Much of the day’s market noise was more a relief that the rhetoric between China and the U.S. was less adversarial. For the equity markets, the big surprise of the day was one that was very forgettable for the large shorters was Elon Musk’s comment that he was going to take the company, all $82 bio, private.
For the bond markets, the story is a little different. With the knowledge and burden of more supply, today’s 3-year tender was received with a lukewarm response. It seems that bond investors are becoming a little weary. Simply put, the market is now starting to have second thoughts with the knowledge that the Treasury will be issuing more bonds to make up for the shortfall in taxation receipts. Meanwhile, traders are building on their already large short positions.
For the moment, however, 3% for the 10-year still seems an unlikely hurdle. For an aging population and by comparison with many other G20 countries, U.S. bond rates look reasonable value and that is driving demand. Until that relationship changes, it’s hard to see the U.S. bond market veering too far from this level. Another factor that could assist the bond market are the pension funds reallocating. With some $1.55 tr in assets looking to be reallocated, a shift back to bonds could lead to a significant rally.
Equities: The S&P rose 0.3%. The Dow rose 0.49%. The Stoxx 600 climbed 0.5%. Vix closed 10.93.
Currencies: The Bloomberg Dollar Index fell 0.2% and the Euro rose 0.4%.
Bonds: The ten-year closed around at 2.977%. The 2-year closed at 2.67% and the 30-year closed at 3.122%. The ten-year bund closed at 0.409% and the UK gilt closed at 1.327% and the OAT closed at 0.731%. The U.S. curve closed the day with the following closes 2/10 at 29.9bp, 2/30 at 44.4 bp and the 10/30 closed at 14.3 bp. The U.S. 5-year closed at 2.845%.
Commodities: WTI was flat. Gold rose 0.1%The Bloomberg Commodity Index rose 0.5%.
Bitcoin is trading around $6733.