We are writing history at the moment as EUR liquidity is getting more sought after than USD liquidity. This is a rare event in financial markets, and probably also a sign that the ECB is about to take it too far with QT.
Steno Signals
Steno Signals is our weekly editorial on everything macro. The byline of the editorial is Andreas Steno Larsen, former chief strategist at Nordea Bank and CEO of Steno Research.
Germany on the Brink: Political Chaos, Economic Stagnation, and European Swap Spreads writing history
Is Germany at risk of turning into a French bond/equity case in line with what happened after Macron called for snap elections earlier this year? Let’s dive into the details of the German case here.
China/Germany Flash Watch: How will China navigate the Trump victory?
The Trump trade is roaring in financial markets, but how will China navigate the turbulence? Should we expect a major fiscal announcement on Friday, or perhaps a conciliatory approach to try and avoid tariffs? And what is happening in German politics?
The Week at a Glance: US Election & Fed rate decision to guide the path forward
Probably the most deciding week this year for guiding the US and worldwide economies with the US election on Tuesday as well as a Fed decision on Thursday expected, with the ever more possibility of ending QT early
Steno Signals #124 – Something is WRONG in bond markets
Sovereign bond markets are performing poorly, even following bond market-friendly releases. What on earth is going on? Are we approaching another ‘whatever-it-takes’ moment from the G3 central banks?
Macro Portfolio Update #1 – The Steno Research Macro Portfolio is Live!
The Steno Research Macro Portfolio is live, equipping you to take your investing skills to the next level. Check it out!
Election Watch: 4 Things to look out for on Tuesday
Our thought on 4 important things to look out for for next week’s US election.
China Watch: This is NOT stimulus. It’s a debt swap!
The stimulus being prepared by the NPC for announcement next week seems more like the work of a marketing agency than an economic council. While the numbers are substantial, it’s more of a debt swap than a true stimulus package. Here’s why!
The Week at a Glance: Rates might stay higher for a bit longer (in the US)
While markets are busy revising the growth outlook down in the US, there are still reasons to believe that the growth party seen throughout September and early innings of October will continue, which favors (still) higher yields short-term.
Steno Signals #123 – The market is sniffing out a big liquidity increase
Several markets are already trading as if liquidity has arrived in size, but we have yet to truly see it. The good news is that the ON RRP is close to depletion, which may lead to an early end to QT.
The week at a Glance – The cleanest shirt in the dirty laundry
Our nowcasts on the US economy have continued to prove useful for predicting the direction of macro data, with a rebound in US growth looking like the most viable outcome currently, but the momentum in the rest of the world has yet to show, and we are hence on relative value watch this week.
Steno Signals #122 – Markets have abandoned the cutting narrative (outside of EZ)
We are left with a market pricing that mostly considers 50bp cuts a feasible scenario in the Eurozone, but the ECB is not a 50bp central bank, especially not if its peers aren’t moving that fast.
Portfolio Watch: October reflation or October disinflation?
While traded prices show signs of exhaustion, market rates in USD have soared due to growth repricing, which aligns well with our nowcasts….
China Watch: Time to play briefing bingo again..
It’s time for another briefing from China, this time focused on the real estate market. We should get used to this flow of briefings, but is anything actually changing? Here’s an update on the status of real estate in China.
The Week at a Glance: No Bazooka from China (Yet) – Over to You, ECB
The ECB is likely to re-emerge as a dovish guiding star, and with the absence of any truly positive news from China, the opportunity to receive EUR interest rates is becoming solid again. Meanwhile, UK inflation is expected to soften.
Steno Signals #121: Whatever It Takes—In the US, but NOT in China
While the Chinese fiscal briefing was a huge nothing burger, we are starting to see pockets of the USD-denominated asset space behaving as if a USD “whatever-it-takes” moment is just around the corner.
China Watch: Elevator Up, Elevator Down… The Most Hated Rally in History?
We saw the worst day in the Hang Seng since Lehman yesterday, but China used the opportunity to “feed the rally” with something to look forward to—a briefing on fiscal stimulus on Oct 12. Here is a comprehensive overview of the far-from-impressive stimulus announced thus far.
The Week at a Glance: No Country for Inflation Undershooting Men
Rates market dynamics have swiftly flipped, and the inflation releases this week will likely underpin the shift in sentiment. The labor market is the main reason to cut, not inflation.
Steno Signals #120 – Liquidity and rate cuts are incoming in an already OK economy
A better-than-feared jobs report, although somewhat “clouded” by a large public sector contribution. Overall, it seems like we are getting stimulus for an already stable economy, which is hard to construe as bad news.
China Liquidity Watch: USD easing allowed China to ease, but there is a caveat..
The USD market will be flooded with liquidity in Q4, accompanied by rate cuts, providing Chinese authorities with a window of opportunity to ease policy. However, there is one issue: CNY liquidity is tightening now.
Week at a Glance – Squuuuuuuuuueeeeeeze!
China-sensitive shorts are getting squeezed left, right, and center ahead of a big week for key US figures. The “low hiring, low firing” narrative is likely to persist, but risk assets are finding support from other factors.
Steno Signals #119 – A tsunami of liquidity is upcoming in Q4
China just pulled a market stunt right before a flood of liquidity hits, and the Fed is cooking up some magic liquidity tricks to keep things lively. Buckle up for Q4.
Ifo Nugget: It’s beginning to smell like recession
The full Ifo report has just been released, and here’s our summary of the key data point from the report and our analysis of its implications.
China Watch: Bringing chopsticks to a gun-fight (again)
This is yet another false flag from China, and we expect the stimulus to be insubstantial in size relative to the problem at hand. In this analysis, we will explain why China is allocating insufficient funds to address a major issue.
Week at a Glance – Are We Getting More 50s Across the Globe?
Markets are back on labor watch as Powell has signaled that conditions are not slowing down quickly enough for the Fed to promise more 50s. Meanwhile, expectations for Eurozone inflation are starting to look very soft. Are 50s potentially in play for the ECB if things start to sour quickly?
Steno Signals #118 – The labour market is NOT growing. The Fed will cut MORE
The Fed will get plenty of opportunities to frontload cuts further this year as the labor market remains weak. Is this all driven by the election season? And why is the labor market so out of sync with the markets?
EM Watch: Time to play the long end of the Chinese yield curve?
Is there no end to the bid in Chinese longer-dated fixed income? Our growth, inflation, and liquidity models for China still suggest that Chinese fixed income remains the only worthwhile investment among liquid asset classes in the country.
The Week at a Glance – Is a 50bps Cut Good if Paired with Economic Weakness?
Markets are cheering for a 50bps Fed cut this week, but is it truly something to celebrate if it coincides with economic weakness? Lower rates are not always a positive for risk assets.
Steno Signals #117 – 25bp equals mayhem, while 50bp equals panic?
The decision between a 25bp or 50bp rate hike is of utmost importance this week. In either case, it likely makes sense to continue leaning into Fixed Income, as markets are neglecting inflation and focusing solely on growth.
EM Watch: The Non-Feasible Return of the EM Carry Case Amidst a Global Slowdown
Is it really feasible to expect the EM rates cycle to tighten while the DM cycle is clearly moving in the opposite direction? If history is any guide, such a scenario is highly unlikely, and any window for this would be short.