Recap : Yield Chart Observations


The momentum in the belly may be slowing, with yields now at both the 1.5% support as well as the 50 week moving average which has been a good pivot over the past few years. However, the charts for the longer end and in the EUR market are much more ambiguous.

In contrast to this, Gold prices have fallen sharply this week. This is interesting because gold prices have correlated reasonably well with real yields over the past two years, and foreshadowed the jump in yields last year. So the current divergence vs real yields (in orange, inverted, RHS) is worth noting.

I continue to believe that 30y yields are likely to be lower in the coming months, while front end yields will be higher, even after adjusting for carry.

Separately, this is worrisome, although note that the AVERAGE leverage seems to have leveled off: (via FTA)

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  • Chicago PMI improved to 65.5 vs 61 exp and 63 prev
  • US Personal Income grew 0.3% in Apr as exp vs 0.5% prev
  • Core PCE Deflator rose to 1.4% as exp vs 1.2% prev
  • Canada GDP slowed to 1.2% in 1Q vs 1.8% exp. The previous print was revised to 2.7% vs 2.9% prev.
  • UK Gfk Consumer Confidence improved to 0 vs -2 exp and -3 prev
  • Japan CPI rose to 3.2% vs 3.1% exp and 1.3% prev. as a result of the VAT hike. The Core measure printed 2.3% as exp vs 0.7% prev
  • Japan Housing Starts declined -3.3% YoY in April vs -8.3% exp and -2.9% prev
  • New Zealand Building Permits rose 1.5% vs -3.5% exp and 8.3% prev (which was revised
  • Turkey Trade Balance worsened to -7.2Bn vs -6.6Bn exp and -5.2Bn prev
  • South Africa Trade Balance worsened to -13Bn vs -11.3Bn exp and -11.4Bn prev
  • Both JPM and GS pushed back their expectations for the next BoJ easing, to Oct and March, respectively
  • the European Union is seeking to make the credit market more transparent by publicly disclosing bond-trading prices. Dealers are concerned they will suffer the fate of their U.S. counterparts after the introduction of the Trace bond-price reporting system in 2002, when a study found $1 billion in commissions were wiped out in the first year alone… Under Trace, trades must be reported within 15 minutes of execution. The average bid-ask spread, a measure of the cost of trading, is currently about 40 percent lower in the U.S. than in Europe, according to data from MarketAxess Holdings Inc., which runs a trading platform. Expressed as a percentage of face value, the spread is an average of about 0.25 percent of par in the U.S., compared with 0.4 percent in Europe, the data show. – BBG
  • Apple has had discussions with retail chains about a mobile payments service with iOS devices. “The Apple mobile payments service would be integrated into iOS Devices such as the iPhone and would be a comprehensive solution that would allow an iPhone user to leverage their device as a form of payment in retail stores. Based on information from various people briefed on the matter, the service would tie directly to iTunes accounts.” 9to5 Mac

Upcoming Data:

  • Weekend: China Mfg PMI, AU Mfg PMI, Building Approvals, Japan Capital Spending, PMI,
  • Mon: UK PMI, GermanyCPI, US ISM
  • Tue: RBA, UK Nationwide House Px, EU Unemployment, CPI, Turkey CPI, Australia GDP,
  • Wed: EU Services PMI, US ADP Employment, BoC, US ISM Non-Mfg, Australia Trade Balance, HSBC Services PMI
  • Thu: BoE, ECB, CanadaBuilding Permits, US Jobless Claims,
  • Fri: German Current Account, UK Trade Balance, US Employment Canada Employment