Recap 5-24-13




  • Kuroda spoke saying BoJ has announced sufficient monetary easing, which triggered the Nikkei sell off. He also said Bank will continue to make efforts to end deflation, and that the Bank has no target for currency and stocks. He also said he wants to avoid volatility as much as possible and does not expect any spike in yield.. The mkt bounced off the lows after the BoJ conducted a second Rinban operation, lowering yields. JPY 1 month risk reversal turned negative for the second time this year and the first time sine BoJ’s QE announcement.
  • German IFO rose to 105.7 in May vs 104.4 exp and prev
  • US Durable Goods Orders rose 3.3% in April vs 1.5% exp and -5.7% prev. Core Capital Good Orders rose 1.2% MoM vs 0.5% exp and 0.2% prev.
  • China is planning to shift gears so that the private sector and market forces play a larger role in its economy – NYT
  • China/US officials strike accounting pact; the deal would give US auditors access to documents from Chinese accounting firms. WSJ

Upcoming Data:

  • Fri: German IFO, US Durable Goods Orders,
  • Mon: US Memorial Day
  • Tues: Swiss Trade Balance, French Consumer Confidence, US Consumer Confidence, Japan Retail Trade
  • Wed: Spain Real Retail Sales, German unemployment, BoC, South Korea Business Survey, Australia Building Approvals, Private Capex expectations.

2 thoughts on “Recap 5-24-13

  1. whoosh audjpy. beaten brutally, only thing moving on a pre-holiday friday.

    v x x vol seems quite cheap. gold put skew seems rich, given that it took off and seems widely held. all jpy cross vols up, particularly the smile? perhaps rich.

    rates space — has the rise of risk parity among the real money set seeded its own destruction, what happens when realized vol rises and all those allocations change at the wrong time?

    The end of copper commodity financing and massive inventories about to move onto the lme seems quite bearish. is dr. copper still dr. copper though?

    china – is this the year, as it seems like the wealth management products nonperforming loans feedback loop is potentially nasty?

    many questions I guess. buying risk still feels queasy, and still looks like it will work.

    1. Hey qe,
      Good point indeed – the risk parity mania has the potential to move things quickly… A jump in vol in both rates and equities space could be ugly. If the average lookback period for volatility is long enough, however, maybe it will be OK.

      I don’t think dr copper is what it used to be. China became the marginal consumer of copper a long time ago, but with their massive trade surplus, I suppose you could’ve argued that copper prices was a leading indicator for global imports from China, and hence global growth. And even if copper is a proxy for US housing, the sector is still such a small part of GDP that I’m not sure how much signal there is vs noise.

      Agree that long equities will continue to work for a while yet, short term volatility aside. Risk on!


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