MAD Macro - Jay, We Need Help Selling Our Bonds
The Auctions Are Getting Scary, Jay!
Greg, Are you Saying the Orange Mad King I did it?
Janet Yellen, the fairy godmother of the U.S. Treasury, is having trouble selling her bonds. Janet needs some help from Jay Powell, the wizard of central banking. They both need to start casting spells on the market. Maybe Jay will cast the easing spell to save both democracy and Janet’s Treasury auctions. There were two smelly auctions yesterday, a 2yr and a 5yr. Paul Krugman, my favorite lefty economist, has been writing about smelly septic systems lately. Yesterday, Paul wrote that global warming is causing septic systems to overflow. Maybe he should start writing about the smelly auctions. Paul has been cheerleading government spending for years. He refuses to admit that fiscal deficits are one of the reasons inflation spiked 20% in the Tin Man’s first three years as president of the free world. I have been expecting Paul to call for a Fed easing and today he did. He has a new opinion article in today’s NYT, linked here. It’s titled, “On the Dangers of Inflation Brain”. Paul argues that because the ECB is going to ease in June that the Fed should also ease next month. Somehow if Jay does not ease in June it will be the Orange Mad King I’s fault. Maybe Paul should take a look at yesterday’s 2yr and 5yr auction results. That’s the septic system that is starting to overflow.
Speaking of overflowing septic systems, Robert De Niro was down at the Orange Mad King I’s court house yesterday as one of the Tin Man’s surrogates. Apparently, it wasn’t Jinksy who overflowed the world’s septic system. It is the Orange Mad King I who left the toilet running. Robert De Niro is sure that if the Orange Mad King I is reelected, the world will end. So first it was Greg Focker who overflowed the septic system, then it was Jinksy and now it’s definitely the Orange Mad King I. How did Robert De Niro finally find out who’s fault it was? The CIA told him. The jury gets the Stormy case today. When the verdict is announced, the Tin Man is going to make a formal statement from the White House. Maybe he already knows the verdict. The Tin man should use Nixon’s “checkers speech”. Only this time he can say that the Orange Mad King I is the crook. Then the Tin Man can give the democratic nomination to Hillary. After all, she should have won the 2016 election.
Markets are lower today following yesterday afternoon’s selloff on the smelly auction results. Yesterday was a quiet Tuesday following a long weekend so maybe it was a bad idea to hold both a 2yr and 5yr auction. Unfortunately, Janet needs to sell bonds almost everyday to fund the Tin Man’s deficits. The yield curve steepened a little yesterday after the smelly auctions. It’s a little steeper again today and is back above the 200 day. If Jay casts the easing spell next month as Paul Krugman is recommending, he will do more than save democracy. He will trigger a sharp steepening in the yield curve and a possible selloff in risk assets.
I updated the U.S. Dollar Index, U.S. 10yr yield, U.S. 10yr-2yr yield spread, WTI crude oil, NY copper, spot gold, bitcoin, S&P futures and NASDAQ 100 futures charts below.
The dollar is a little higher today. It held the 200 day support yesterday. Interest rates are mixed after rates jumped across the curve yesterday afternoon.
Crude oil is back above $80. Spot gold and copper are both a little lower. Bitcoin is also a little lower with other risk assets.
Both the S&P and NASDAQ 100 futures are lower.
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Unless otherwise stated, Bloomberg is the source of all data and charts.
S&P 500 futures are a type of derivative contract that provides a buyer with an investment priced based on the expectation of the S&P 500 Index’s future value. Nasdaq 100 futures are commodities futures products traded within the equity futures sector. West Texas Intermediate (WTI) oil is a benchmark used by oil markets, representing oil produced in the U.S. Brent Crude Oil is a blend of crude oil recovered from the North Sea in the early 1960s, whose price is used as a benchmark for the commodity's prices. The U.S. dollar index (USDX) is a measure of the value of the U.S. dollar relative to the value of a basket of currencies of the majority of the U.S.'s most significant trading partners. UBS Bloomberg Constant Maturity Commodity Index is a total return rules-based composite benchmark index diversified across commodity components from within specific sectors.
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