Friday, March 22, 2019

March 22, 2019, T+79 -- Part 1

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The "Fed" rate: Jerome Powell signals prolonged Fed pause as inflation lags, risks loom. Some time ago it was reported that the next fed "move" was more likely to be a "cut" rather than an "increase." In this note from Bloomberg that possibility was raised again.
Financial markets confirmed the dovish interpretation, with futures traders lifting the probability of the Fed cutting rates this year to almost one-in-two. The 10-year Treasury yield dropped to its lowest level in more than a year, while the dollar was poised for its biggest daily loss since January. Stocks retreated.
Additional "Fed" action: from the same report --
In a separate statement Wednesday, the Fed said it would start slowing the shrinking of its balance sheet in May -- dropping the cap on monthly redemptions of Treasury securities from the current $30 billion to $15 billion -- and halt the drawdown altogether at the end of September. After that, the Fed will likely hold the size of the portfolio “roughly constant for a time,” which will allow reserve balances to gradually decline.
Germany: 10-year bond yields crash below zero as growth fears roil markets. Powell cited the EU economy as one of the prime reasons for turning dovish. Personally, I can't get too excited about this, we've been through this before.
Germany became the second G-7 nation after Japan to issue 10-year bonds with a negative yield, highlighting a willingness among investors to hold top-rated debt even as yields across the world collapse. 
Germany's 10-year government bond yield turned negative for the first time at an auction, fetching the lowest average yield on record for such paper at -0.05 percent.
German 10-year bond, link here, this morning, -0.006% --

Subtle spin: in July, 2016, Hillary in a race against Trump, CNBC suggested that the negative yield reflected a willingness among investors to hold top-rated debt but today with Trump in office, the same event "roils world markets."

Nine high-margin stocks seen leading in a new "dovish" era: from Goldman Sachs --
  • Penumbra (PEN)
  • Amgen (AMGN)
  • Monolithic Power Systems (MPWR)
  • National Instruments (NATI)
  • Citrix Systems (CTXS)
  • VMWare (VMW)
  • Eli Lilly (LLY)
  • Expedia Group (EXPE)
  • Xilinx (XLNX)
B-52's still in the news: from oilprice -- is Beijing losing its footing in the South China Sea. Consider the source, but some interesting information.

Canadian Solar in the news yesterday: shares plunged almost 20% yesterday. If this is reflective of the entire industry, it could be a tough year for solar in 2019.

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