Asia Wrap : UST 30's

Stephen Innes SPI Asset Management

UST 30’s

The US 30 year bond has broken below 2.00%. In the middle of the GFC, it got to 2.50%, and in the mini downturn of 2016, the low was 2.09%. Given that we are deep up to our neck in unfamiliar waters, frankly from where I’m sitting it's a bit unsettling if not downright scary.

Whether this move is pre-positioning against the race to zero or recessionary fearmongering but with some chunky flows going through the futures markets and indeed not of the hedge overlay variety (i.e. risk on risk-off), it does suggest the big boys are picking tops and turning positions quite aggressively.

Difficult trading conditions

It is getting increasingly difficult to hold an uninterrupted view against these pretty sharp moves in rates markets over the past 24 hours.

But the inherent problem is President Trump twitter feed and the predictability of how unpredictable he is with regards to trade escalation and de-escalation making trading next to impossible to carry a short-term view. Even more so with the markets risk barometers so intricately dialled into US-China trade development.

The point, in fact, we bounced off Asia’s worst levels after President Trump tweeted that Xi was a "great leader" which is being viewed favourably in ASEAN markets

Oil markets

The oil market is getting held hostage to risk aversion across a plethora of channels making for treacherous trading conditions. However, the markets have seemingly sidestepped the US inventory build deferring to focus on the strong underlying seasonal product demand that suggests the market could return to inventory draw sooner than later.

But with the markets in a heightened state of recessionary fearmongering; there could be limited risk appetite until we get more positive signals (Trump Tweets) that some sign of progress is being made ahead of US-China trade talks due to re-start next month.

Gold markets

No change our morning Gold view. Prices will remain susceptible to the unpredictable nature of US-China trade headlines while the stable USD will continue to entice near term profit-taking.

Author

Stephen Innes

SPI Asset Management

With more than 25 years of experience, Stephen has a deep-seated knowledge of G10 and Asian currency markets as well as precious metal and oil markets.

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