One month ago, we were surprised to report that the junk bond issued by French telecom company Numericable would, after its 100%+ upsizing, become the largest high yield bond on record.
Malkiel would be shocked...
As we noted previously, one of the bedrock notions in modern finance is the “Random Walk Hypothesis”, which essentially says that every day is a new one. Markets are like Buddhist monks in this paradigm, waking up with nothing and taking their begging bowl into the streets to see what fate brings. If markets are up 5 days in a row, the sixth day may be up or down in line with long term trends. And long term here means the life span of a Galapagos Island tortoise.
Submitted by Aaron Chan via Medium.com,
Last week, we discussed the precarious state of the overstretched U.S. consumer and the spill-over effects of poor performance on the part of major retailers and other consumer discretionaries. In a nutshell, consumer credit growth appears to have reached its cycle-high and retail sales growth is beginning to flatline:
Despite US equity investors' exuberance over bouncing crude oil prices, the world's crude producers continue to suffer and while Venezuela is in the headlines every day (having already collapsed into chaos), Nigeria appears the nearest to that abyss next. Having urged investors "don't panic" last year, and seeing dollar reserves drying up rapidly earlier this year, recent "lies" about the nation's statistics have raised fears of a looming devaluation as FX forwards have crashed to 291 Naira to the dollar (current peg is 199).
Following yesterday's surprisingly strong 2 Year auction, the US Treasury pulled off another blistering auction when moments ago it sold $34 billion in 5 year paper (Cusip R77), at a high yield of 1.395%, stopping through the when issued by 0.8 bps, a surprising outcome following two consecutive tailing auctions, with a Bid to Cover of 2.60, the highest since November 2014. Incidentally, the yield of 1.395% was lower than last month's 1.41% when June rate hike odds were in the single digits.