David Fuller and Eoin Treacy's Comment of the Day
Category - General

    Treasuries Reach Day's Highs After JOLTS Job Openings Slumps

    This article from Bloomberg may be of interest. 

    Treasury 10-year note futures spike to fresh session highs after February JOLTS job openings declined more than estimated with January revised lower. At the same time February factory orders missed estimates for headline and ex-transport readings. 

    US 10-year yields flip to richer on the day into the move as 10-year futures top at 115-28, with around 60k 10-year note contracts changing hands over 3-minute period

    Belly- and front-end-led gains steepen 2s10s, 5s30s spreads onto session wides, higher by 7bp and 4bp on the day

    Fed-dated OIS for May meeting drops to around 15bp of additional hikes priced, giving up around 5bp of hike premium in the aftermath of the data

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    Jamie Dimon says the banking crisis is not over and will cause 'repercussions for years to come'

    This article from CNBC may be of interest. Here is a section: 

    "The recent failures of Silicon Valley Bank (SVB) in the United States and Credit Suisse in Europe, and the related stress in the banking system, underscore that simply satisfying regulatory requirements is not sufficient. Risks are abundant, and managing those risks requires constant and vigilant scrutiny as the world evolves," Dimon wrote. 

    The JPMorgan CEO instead called for more forward-looking regulation. He pointed out that the held-to-maturity bonds that have become problems for many banks are actually highly rated government debt that scores well under current rules, and that recent stress tests did not game out a rapid rise in interest rates. 

    "This is not to absolve bank management – it's just to make clear that this wasn't the finest hour for many players. All of these colliding factors became critically important when the marketplace, rating agencies and depositors focused on them," Dimon wrote.

    He said that regulation should be "less academic, more collaborative" and that policymakers should be more wary of potentially pushing some financial services to nonbanks and so-called shadow banks. 

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    Stolen Range Rovers Are Tip of Alarming Iceberg

    This article from Bloomberg may be of interest to subscribers. Here is a section: 

    The US’s largest car insurer, State Farm Mutual Automobile Insurance Co., reported a $13.4 billion (!) underwriting loss last year, the largest shortfall in its 100-year history; Allstate Corp.’s auto-insurance underwriting loss was $3 billion, while Berkshire Hathaway Inc.’s Geico car-insurance unit lost $1.9 billion.

    In the UK, Direct Line Insurance Group Plc’s chief executive departed in January after mounting losses at the motor division forced it to scrap its dividend. The stock has declined more than 50% in the past year.

    These woeful results have shaken confidence in the industry’s purported ability to assess risk and forecast accurately. Insurers are belatedly hiking premiums, though often not as quickly as they’d like. Customers who drive Range Rovers and other vehicles prized by thieves, may struggle to get coverage at all.

    Soaring used-car prices are the proximate cause of insurers’ woes – a textbook example of how supply chain upheaval can cascade through the economy. Historically, vehicles were a depreciating asset, but suddenly the cost of replacing a stolen or damaged vehicle was far more than insurers had calculated.

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    Biden Has Limited Options to Respond to OPEC+'s Oil Cut

    This article from Bloomberg may be of interest to subscribers. Here is a section: 

    4: Export Curbs
    Other levers the Biden administration has at its disposal include limiting the export of gasoline and diesel. The White House considered that option last year as a potential means to tame pump prices, which reached an all-time high in June, but it never pulled the trigger. Analysts said moving ahead with the curbs could backfire and actually lead to higher prices in some parts of the US.

    “If we go into the summer with gasoline at $4 a gallon, I would think they would also revive consideration of product export restrictions,” said Bob McNally, president of consultant Rapidan Energy Group and a former White House official. “If this leads to an overtightening of the oil markets — as they say in the Navy, stand by for heavy rolls.”

    Requiring oil companies to store more fuel in inside the US — mandatory stockpile requirements that were considered last year in response to previously low fuel inventories — is an option that could return to the table as well if gasoline prices remain high, McNally said.

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    Tesla Shares Drop After Price Cuts Barely Boost Deliveries

    This article from Bloomberg may be of interest to subscribers. Here is a section: 

    After Tesla cut prices of its top-selling Model Y by as much as 20% and discounted its most expensive vehicles by tens of thousands of dollars, Musk said in late January that orders were running at almost twice the rate of production. The figures reported Sunday indicate there was a slowdown later in the quarter, as the company ended up making almost 18,000 more cars than it sold.

    “Continued excess production over deliveries will keep the debate going on price elasticity versus general demand weakness,” Philippe Houchois, a Jefferies analyst with a buy rating on Tesla stock, said in a note.

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    Glencore Will Likely Sweeten $23 Billion Teck Bid, Analysts Say

    This article from Bloomberg may be of interest to subscribers. Here is a section: 

    Glencore faces a tight deadline to sweeten its proposal. Teck’s plan to separate its coal business and wind down the dual-class share structure will go to a shareholder vote on April 26. Glencore Chief Executive Officer Gary Nagle told investors in a Monday conference call that its proposal can’t be implemented if Teck’s shareholders approve that plan.

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