Real U.S. Treasury Curve Turns Positive and More Evidence of Slowdown in China
September 16, 2019 | FIRESIDE CHARTS
While futures have declined slightly following the Saudi oil attacks, we saw equities rally last week thanks largely to renewed trade war optimism. Both nations have made concessions in recent weeks, leading to increased expectations that an interim deal could be struck when negotiators meet in October. Economic reports out of China have added fuel to the speculative fire as industrial production, retail sales, and fixed asset investment all fell short of estimates in a broad demonstration of economic slowdown. Could this strengthen the U.S.’s position at the negotiating table? Meanwhile, expectations remain high for news of a quarter-point rate cut to come from the Fed this week. That said, a ~0.25% jump in interest rates and a positive curve in real U.S. Treasury yields may give them a bit more room to maneuver as they aim to bolster the economy amid our own trade-war struggles.
1. U.S. futures have fallen modestly following this weekend’s attacks in Saudi Arabia.
Source: WSJ Daily Shot, as of 9/15/19
2. And precious metals have spiked slightly in response to the attacks.
Source: WSJ Daily Shot, as of 9/16/19
3. Interest rates quietly and quickly shot up ~0.25% across most of the curve…
Source: The Chart Store, as of 9/13/19
4. This has made the real (interest rates less inflation) curve to go positive, allowing the Fed more room to cut…
Source: The Chart Store, as of 9/13/19
5. Yield spikes often occur following periods of weak global growth.
Source: J.P. Morgan, as of 9/16/19
6. Will higher U.S. interest rates keep a bid under the USD?
Source: The Chart Store, as of 9/13/19
7. A look at which nations opposed the ECB’s decision to restart QE.
Source: Bloomberg, as of 9/16/19
8. More disappointing economic news out of China. The trade war is not helping their economy grow…
Source: WSJ Daily Shot, as of 9/16/19
9. A little trade war truce and suddenly the Chinese currency comes back to “target”…
Source: Bloomberg, as of 9/16/19
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