Euroland is having a strong start this morning as yields fall a little in the sovereign space. FOMC minutes are out this afternoon, so we may get a more nuanced insight to the future path of rates that didn’t come across in the previous release.
Yes, they did it. Germany raised €824 million in 30 year zero-coupon notes this morning that priced with a price of 103.61 an average yield of -0.11% --- the first-ever negative yielding auction result in their history. The result marked a 41 bps discount to July’s sale and ended with a 1.05X bid-to-cover ratio. More importantly however was the total size which fell embarrassingly short of the originally planned €2 billion target raise (the Deutsche Bundesbank took down the remaining 59% unsold and announced they would gradually filter it out into the secondary market over time). Market reaction is actually little changed post-auction as the results were widely expected prior. But with the entire Bund yield curve fully in negative territory and the 30 year tenor actually being the LEAST negative
among all points on the spectrum, one has to wonder if the nation’s central bank will eventually be forced to be the majority buyer at all future auctions. Based on today’s lackluster result, it could very well happen.
There is now a Barclays Index of global negative yielding debt. It has 4538 “member” positions in it, yields on average -0.4% and has returned 3.3% over the past 4 months.
Our take for sovereigns, where there is much central bank buying creating huge “non-economic” demand (ie. Demand that is not concerned with returns) is different to that for corporate negative yields, where a shareholder stands to benefit from the issuance at zero or negative borrowing. In that space, while great for shareholder in the short term, we believe it will ultimately be destructive to business competitiveness.
The U.S. trade-weighted dollar has been on a tear the past couple of months, it’s made fresh YTD highs but has breached the upper band of its trading ranges. A trading band or envelope are typically defined using a standard deviation over a simple moving average. The chart below plots two bands above and below the dollars 50 day moving average. The fact that it’s touched the upper band signifies that this is a period of high volatility and possibly unstable levels.
Search – Click. This Axios article is interesting,
noting that for the first time ever the majority of Google searches have resulted in zero follow on clicks. Notice how when you search “Blue Jays schedule” it just shows up on a Google page instead of you clicking through to MLB.com? This is Google’s attempt to keep you in their environment… and it’s working.
With less than two weeks to go, Trump abruptly cancelled his planned state visit to Denmark after his offer to buy Greenland was flat out refused
. The Onion couldn’t even make this stuff up, but it does provide a break from the top headline being trade-war related at least. We agree with the Danish PM that this is all an “absurd discussion”.
Despite the rather disappointing IPO of Lyft, analysts are hopeful that Lyft insiders aren’t dumping in stocks the first chance they get
. Lyft had a total of 257.6 million shares, with 88% of the total shares outstanding, becoming eligible for purchase. In fact, Tom White told CNBC that he is surprised to see Lyft shares actually increase on the lockup expiration date.Diversion
: Say Catnip! This iPhone attachment
is PURRfect for getting your cat’s attention for selfies.