October 4, 2023

Global Bond Selloff Upends Markets as Borrowing Costs Surge

📰 News Organizations

  • Global Bond Market Selloff Turmoil. The selloff in global markets has gathered pace and yields on 30-year Treasuries hit 5%, the highest level since 2007, as traders brace for an extended period of elevated interest rates.

  • Kevin McCarthy Ousted as US House Speaker. The Republican lost a pivotal vote and was removed from the role of House Speaker in an unprecedented demonstration of the power his far-right opponents wield over the GOP. First ousted speaker in US history.

  • Intel to IPO Programmable Chip Unit. Intel said it will treat its Programmable Solutions Group as a standalone business, with the goal of conducting an IPO for the unit in the next two to three years. Intel will continue support the business and will retain a majority stake.

  • Zoom Adds Word Processing to Compete With Microsoft. Collaborative document editing, similar to Google Docs, will be made available next year. The tool had the ability to include information and AI-generated summaries from Zoom meetings.

  • GM’s Third-Quarter Sales Jump 21% As UAW Strike Slowly Expands. The UAW strike had little to no direct effect on General Motors’ third-quarter U.S. new vehicle sales but will likely face sales and supply chain problems if the strike persists.

  • Ford, GM Lay Off About 500 Factory Workers as UAW Strike Effects Ripple Out. Ford idled two factories supplying parts to a Chicago SUV plant due to a walkout, resulting in layoffs for about 330 employees. GM laid off 130 workers in Ohio.

  • Southeast Asia Set To Drive Up Demand For Natural Gas. Southeast Asian countries are set to become the main demand drivers for the LNG market over the next few years, industry watchers forecast, largely because of government energy development plans in the area.

🐦 Twitter

  • Large- and mid-cap ETFs continue to command majority of inflows over past month; interest in/inflows into small caps returned last week; and on one-month basis, government bond ETFs represent nearly 17% of inflows (up from 13% in prior week). Source.

  • The 10-Year Treasury Yield moved up to 4.69% today, the highest since Oct 2007. The Real 10-Year Yield (adjusted for expected inflation) of 2.34% is the highest since Dec 2008. The US bond market now has a negative total return over the last 7 years. Source.

  • The latest yield surge shows Treasuries are detached from their fundamental drivers: JPMorgan analysts. Ed Yardeni says the selloff shows broad concern about the US's fiscal policy of escalating federal budget deficits. Source.

  • The Russell 2000 finished September 2023 with a 2.4% 5-year annualized return—a performance nearly identical to its year-to-date result through the end of 3Q23 and evidence of just how underwhelming recent returns have been for the small-cap index. Source.

  • Gas prices have risen a lot less than the surge in oil prices which is keeping the lid on inflationary pressures for now. Refiner spread collapse to lowest since Jan '22 bailing out the economy despite oil price surge. But now getting close to where oil px will flow through. Source.

Investors still don't get that long-term bond yields are out of the Fed's control. Even if the Fed decides to pivot to prevent yields from rising too much, rate cuts and a return to QE will cause the dollar to sink and inflation to soar. That scenario is bearish for bonds.

Peter Schiff

📓 Online Publications

  • Job Openings Jump To 9.6 Million. The labor market is cooling off, but slowly. Job postings have dropped from a record 12 million last year, but they are still well above pre-pandemic levels, reflecting a robust appetite for labor in light of a steadily growing U.S. economy.

  • US Annual Home Price Growth Rate Increased in August. August’s annual 3.7% home price gain was the highest since February 2023. New Hampshire, Maine, Vermont, and Rhode Island saw the largest year-over-year price gains in August.

  • Opendoor Stock Plunged 32% in September. A tightening housing market continued to affect the real estate stock. The Fed's updated interest-rate forecast poses another challenge for Opendoor. The company is unlikely to return to profitability until interest rates start falling.

  • There are still 8.8 Million Open Roles in the US to Be Filled. Getting more people to work in the economy can help alleviate a number of problems. GDP will grow faster. Companies will make more profits. Wages will increase. The inequality gap will shrink.

  • Meta Plans to Charge $14 a Month for Ad-Free Instagram or Facebook. This is what Meta wants to charge Europeans for monthly subscriptions if they don’t agree to let the company use their digital activity to target ads, according to a proposal.

🎧 Podcasts

  • IMF Head Backs Reforms That Could Give China More Voting Power. IMF Chief Georgieva seeks more resources for global challenges, potentially strengthening China's influence, but faces US resistance. Source(5:54)

  • Wage Increases May Offset Inflation Resurgence. A resurgence in inflation is unlikely as wages are increasing, a trend that typically lags behind inflation. Nevertheless, it will impact earnings revisions, posing a challenge for corporations to pass on the rising input costs. Source(10:35)

  • Futures ETF Demand Soft as Market Awaits Spot ETFs. The demand is lukewarm amid the current market conditions, attributed to a bottoming range and anticipation for incoming spot ETFs. Despite this, the outlook is more bullish for the next year. Source(17:52)

  • Walgreens' Battle Over High-Tech Cooler Doors Heats Up. Walgreens is embroiled in a legal dispute with interactive display company Cooler Screens over the alleged failure of a technology test involving digital screens on cooler doors. Source(18:58)

  • Every Generation Lost Wealth Except Millennials. The global wealth report says every generation lost wealth last year except for millennials who tied their investments to real estate instead of the stocks. One contributing factor is the Millennials are in their prime earning years. Source(28:23)