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“Bond investors are the vampires of the investment world. They love decay, recession – anything that leads to low inflation and the protection of the real value of their loans.” – Bill Gross
It’s looking like it’s going to be one of those days. Futures were just modestly negative overnight but then started to really weaken as Europe opened for trading and things haven’t stabilized since. The S&P 500 faces losses of around 1% at the open with the Nasdaq down over 1.5%. If equities were looking to rally coming into the week, yesterday’s Fed commentary put at least a temporary stop to that. Interest rates are higher across the curve and the 2s10s yield curve has steepened well out of inverted territory, but that comes along with yields on the 10-year above 2.6% to its highest level in just over three years.
The economic calendar is light today as weekly mortgage applications were the only release, and they fell 6.3% following a 6.8% last week and an 8.1% decline the week before that. Besides that, Energy inventories will be released at 10:30 and the Minutes from March’s FOMC meeting will be released at 2 PM. Philly Fed President Harker and Richmond Fed President Barkin will also be speaking this morning.
Read today’s Morning Lineup for a recap of all the major market news and events from around the world, including the latest US and international COVID trends.
For bond investors, these days are tough indeed. With inflation rampant around the world and central banks finally putting the brakes on the gravy train of liquidity, the increase in interest rates has been relentless with bond prices seeing some of their largest declines in years. A case in point is the iShares 20+ Year US Treasury Bond ETF (TLT). It’s already down 13% YTD and indicated to open lower today by another 1%. The chart below shows historical drawdowns from record closing highs in TLT since its inception in late 2002. Based on where the ETF is trading this morning, it has now declined 26% from its last record closing high back in early August 2020. Throughout its history, there have only been a handful of other periods where TLT ever experienced a peak to trough decline of more than 20%, and the only other time it dropped more was coming out of the Financial Crisis.
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Welcome to Bespoke Brunch Reads — a linkfest of the favorite things we read over the past week. The links are mostly market related, but there are some other interesting subjects covered as well. We hope you enjoy the food for thought as a supplement to the research we provide you during the week.
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Russia Built Parallel Payments System That Escaped Western Sanctions by Alexander Osipovich and AnnaMaria Androtis (WSJ)
While Russia’s central bank and debt markets have been badly hobbled by sanctions, consumer payments are flowing thanks to the country’s homegrown payments system. [Link; paywall]
War with Russia? Finland has a plan for that by Richard Milne (FT)
Finland’s larger neighbor has long been a threat, and the response from Finnish society has been a layered approach that builds best practices for national defense into all aspects of social planning. [Link; soft paywall]
Democrats: Go Directly to the Center by Ruy Teixeira (The Liberal Patriot)
A plea for Democrats to hue away from the left ahead of midterms later this year, though whether they can recover from the traditional mean-reversion against the majority during a President’s first term regardless of their pitch to voters is an open question. [Link]
Why are women voters moving to the left? by Stephen Bush (FT)
Across the developed world, women are increasingly voting to the left, with the patterns holding across a range of countries over the past decade or so. [Link; soft paywall]
A Rugged Newcomer Looks to Fill a Void Left by Land Rover by Mercedes Lilienthal (NYT)
Upstart auto manufacturer INEOS Group is hoping to seize the terrain vacated by Jaguar Land Rover when it discontinued its venerable Defender SUV in 2016. [Link; soft paywall]
Expensify’s unusual diversity drive by Jamie Powell (FT Alphaville)
A SaaS company that IPO’d last year is going to contribute 25% of salaries paid to white, male employees to a foundation that focuses on housing equity, youth advocacy, food security, reentry services, or climate justice. [Link; registration required]
Positive Drug Tests Among U.S. Workers Hit Two-Decade High by Will Feuer (WSJ)
Roughly one in twenty five drug tests processed by Quest Diagnostics last year came back positive as legalized marijuana spread across the country. [Link; paywall]
Ben McKenzie Would Like a Word With the Crypto Bros by David Yaffe-Bellany (NYT)
The fascinating story of how the former star of The OC has become a voice of reason and anti-crypto activist in the midst of a campaign against his fellow celebrities’ constant shilling. [Link; soft paywall]
Citrus fruits, scurvy and the origins of the Sicilian mafia by Alessia Isopi and Arcangelo Dimico (The Conversation)
The origins of la cosa nostra in Sicily during the 19th century are obscure, but probably had a lot to do with the booming demand for citrus brought on by a desire to keep sailors away from scurvy during long-distance sea voyages. [Link]
Global wind and solar growth on track to meet climate targets by Forrest Crellin (Reuters)
If the wind and solar industry can continue growing at its 10 year growth rate over the next decade, there will be enough renewable energy supplanting carbon-based generation to reduce sufficiently to limit warming to 1.5 degrees Celsius. [Link]
Class Attendance in College: A Meta-Analytic Review of the Relationship of Class Attendance With Grades and Student Characteristics by Marcus Credé, Sylvia G. Roch, and Urszula M. Kieszczynka (Review of Educational Research)
Regular class attendance is an incredibly consistent predictor of academic success across a wide variety of outcomes and controls, outperforming all other variables. [Link; 25 page PDF]
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Have a great weekend!