The Closer – Global Rates, Intraday Patterns, Real Yields – 6/5/24
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we start out with a look into the Canadian central bank cut and global policy rates more broadly (page 1). We then provide a look at the intraday pattern that has developed in the past few sessions (page 2). We also check in on the streak of real yield declines (page 3). Pivoting over to economic data, we recap today’s PMIs (page 4), the latest housing inventory data (page 5), and petroleum stockpile readings (page 6).
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Daily Sector Snapshot — 6/5/24
Fixed Income Weekly — 6/5/24
Searching for ways to better understand the fixed income space or looking for actionable ideas in this asset class? Bespoke’s Fixed Income Weekly provides an update on rates and credit each week. We start off with a fresh piece of analysis driven by what’s in the headlines or driving the market in a given week. We then provide charts of how US Treasury futures and rates are trading, before moving on to a summary of recent fixed-income ETF performance, short-term interest rates including money market funds, and a trade idea. We summarize changes and recent developments for a variety of yield curves (UST, bund, Eurodollar, US breakeven inflation, and Bespoke’s Global Yield Curve) before finishing with a review of recent UST yield curve changes, spread changes for major credit products and international bonds, and 1-year return profiles for a cross-section of the fixed income world.
Our Fixed Income Weekly helps investors stay on top of fixed-income markets and gain new perspectives on the developments in interest rates. You can sign up for a Bespoke research trial below to see this week’s report and everything else Bespoke publishes for the next two weeks!
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Chart of the Day – 10-Year Yield Drawdowns
Bespoke’s Morning Lineup – 6/5/24 – Softening Indeed
See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week trial to Bespoke Premium. CLICK HERE to learn more and start your trial.
“If you put the federal government in charge of the Sahara Desert, in 5 years there’d be a shortage of sand.” – Milton Friedman
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
This morning, we’re seeing a modestly positive tone in equity markets as treasury yields have barely moved. The risk-on mentality can be seen in Bitcoin where prices cracked back above $70K yesterday and now sit right around $71K. Overnight in Asia, India bounced over 3% while Japan and China both traded down nearly 1%. Service sector PMIs for both countries were better than expected. In Europe, the tone is more positive as Services sector PMIs were close to expectations indicating a modest expansion in that sector.
Back here in the US, the ADP Employment report for May just came out, and it came in weaker than expected at 152K versus forecasts for a reading of 175K. As shown below, the monthly reading has been right around these levels for ten months now, but it is well below the four-year average of 308K. With ADP out of the way, the only other report on the calendar is ISM Services at 10 AM.
Investors are closely watching a stream of employment data this week, including the just-released ADP report. But another insightful source often flies under the radar: Indeed’s job posting report.
This report provides valuable details on various employment trends, as we explored in last night’s Closer. One metric we find very useful is the percentage of industries on Indeed with job postings below their pre-pandemic baseline.
In the wake of COVID, job postings plummeted across all industries. However, from summer 2020 to summer 2021, this percentage steadily decreased. Remarkably, from August 2021 to early 2023, no industries fell below their baseline, reflecting an exceptionally tight labor market.
Over the past year, however, the labor market has begun to loosen. In recent weeks, the percentage of industries with below-baseline postings has reached 32%. While that means two-thirds of industries still have above-normal job postings, the trend suggests easing.
This aligns with other labor market indicators – employment remains strong but not strengthening. If the trend in Indeed job postings over the last several months continues, over half of all industries could see fewer job postings by year’s end compared to pre-pandemic levels.
To continue reading the rest of today’s morning note, where you’ll find much more analysis of global equities and economic readings released this morning, read today’s full Morning Lineup with a two-week Bespoke Premium trial.
The Closer – Fedspeak Index, Job Postings, Ford Sales – 6/4/24
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we begin with an update of our Fedspeak index and performance of the S&P 500 given various readings in the index (page 1). We then dive into today’s JOLTS report (page 2) in addition to the latest Indeed data (pages 3 and 4). We then review today’s Logistics Managers Index (page 5) before closing with a dive into Ford sales (page 6).
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Daily Sector Snapshot — 6/4/24
Bespoke Stock Scores — 6/4/24
EM Election Madness
Equities here in the US have gotten off to a weak start this month with the S&P 500 (SPY) down modestly over the past couple of sessions. However, those declines are being overshadowed by emerging markets. As we discussed in yesterday’s Morning Lineup and Closer and expanded on further in today’s Chart of the Day, Mexican equities have gotten massacred following the country’s election of Claudia Sheinbaum as president. The US-traded ETF that tracks Mexican stocks (EWW) is down 8.3% month-to-date and 12.3% year-to-date. After that decline, the ETF closed yesterday at a record 4.19 standard deviations below its 50-day moving average (DMA). That recent weakness is also a 180 from last year when EWW was the best-performing country ETF of the 22 tracked in our Global Macro Dashboard.
Turning forward to today’s news, Indian equities are likewise responding negatively to an election. As we detailed in today’s Morning Lineup, Prime Minister Narendra Modi’s Bharatiya Janata Party (BJP) and its allies won a majority, but by a much smaller margin than was expected just yesterday. Given the results, the India ETF (INDA) is down 6.6% for its worst day since the final day of 2021. Unlike EWW, INDA is still up on the year, though it has swung from deeply overbought to oversold territory in only a day.
As for the rest of the world, we would note that yet another emerging market has fallen on hard times. Brazil (EWZ) has gotten crushed this year with a 16.7% year-to-date decline even outpacing Mexico for the worst performance in 2024. Averaging across countries, EMs have fallen 0.74% year-to-date whereas developed markets are up mid-single digits on average. Relative to prior highs, the gap between emerging and developed markets is even more stark. EM country ETFs currently sit an average of 9.42% below 52-week highs compared to only 3.28% for developed market countries.
Below, we show price charts of a handful of emerging market economies over the past year with 50-DMA trading ranges shown. As noted earlier, Brazil has been weak and trending lower all year consistently trading below its 50-DMA (gray line). It is not only extremely oversold today, but it is also on the verge of 52-week lows. While EWZ has been trending lower, China (MCHI) has been a bright spot. MCHI is in a long-term downtrend dating back to early 2021, but since the start of this year, it has rebounded. This week’s weakness in Mexico (EWW) comes on what has been a period of consolidation. Since the end of last year, EWW has essentially trended sideways, and current levels are in the middle of last fall’s range. As for India, up until today, the country’s equities have been in a steady uptrend throughout the past year. After today’s decline, the uptrend has taken a hit with the first oversold readings since the fall.
