Dear all,
Can any of you share any insights on today's market??
It is really surprising and worth discussing.
Before NFP, Market was very risk averse showing typical safe haven momentum, with appreciation in Gold, JPY, US Treasuries and EUR.
US Treasuries are not at a cheap price compared to the yield weeks ago. Today's NFP was really strong.
What is the cause for US Treasuries Yield to drop starting 30 minutes after NFP?
My understanding is extraordinary safe haven demand resurface and the strong buying force in European markets took action when they approached the weekly closing.
However, the conflict is, Gold, JPY are corrected today. It seemed all the buying force went into US Treasuries. Why? Wasn't it safer to long US Treasuries before NFP compared to taking huge risk against a really strong NFP?
Please give your opinion! Any thoughts are greatly appreciated!!
:)
Wish you a good weekend!
- BChen
There be bigger beasts than a weak NFP roaming out there in the forest at the moment son
Sir, thank you for the reply!
May I know what the hint is in your reply above?
Could you please share more thoughts or details? :) Eager to learn from you.
There are two reasons bonds rallied on a strong NFP.
Although the headline number was a strong beat on expectations, the average hourly earnings component of the report was a substantial miss on expectations. the federal reserve has already met their employment target, but it cannot seem to reach their 2% inflation target. Because earnings inflation was a big miss, the market interprets this as a signal for the fed to continue being extremely accomodative (bullish for treasuries).
As the previous poster mentioned, there are bigger fears than employment at the moment, the greatest of which is a contracting Chinese econony. A good jobs number was an opportunity for big money to bid up treasuries in a flight to safety.
For what its worth, the move caught me way off guard as well. Hope this helps.
Many many thanks!! Really Helpful!!
Now the rally today seems the concern on inflation is strengthened by the Oil price further since long term outperforms the short term. Also the volatility is magnified by the Auction. Strong auction on 3yr today.
But I personally think it is not a safe-haven momentum, cuz no rise in gold or Jpy. it is purely a net long position open, or the short position close (profit taking) from those bet on March.
May I check with your agreeing my opinion or not?
Thank you!
Last but not least, could you give ideas where the capital to long today's UST comes from? USD appreciates, Stock is stablized (no slump). Usually there is convincing way to see the market capital move from where to where. But I cannot find a way to explain the correlations between markets today.
Thank you! :)
Oil was the leading indicator yesterday, without question. Bonds rallied as oil dipped below $30 /barrel. When oil falls to substantially low levels, there are fears of large oil company debt defaults, so market participants buy treasuries. This is what caused yesterdays bond rally, along with a falling stock market.
I am not sure whether its is short covering or new long positions being initiatied. My guess is that is is a combination of both.
As to where the capital comes from to purchase treasuries: you may have answered your own question. Didn't you mention that gold sold off sunstantially yesterday despite fear in the marketplace? My hypothesis is that traders allocated capital from gold to bonds. And certainly away from oil into treasuries.
Fully Agreed!! Now your explanation makes sense to me! Thank you so much!
Just btw, I personally think now the oil is like the gold in 2011 Summer.
To build a bottomthe momentum has to be stopped thoroughly by a day of huge rally like (8%) rise, causing traders to cover short in panic and others squeeze to buy since the bottom is obvious.
Without that ripple effect the bearish is not over... do you agree ? just my personal shallow understanding....
Thank you!
-BChen
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