Is the "2 and 20" model finally dying?
After not only underperforming the market by 7 years in a row, but generally disappointing even relative to benchmarks, the hedge fund industry started off 2016 with such a deplorable P&L whimper that has even eclipsed the first months of the financial crisis.
As we reported yesterday, the surprising catalyst which for some still unknown reason unleashed yesterday's torrid market rally and selloff in Treasurys, was the announcement by the US Treasury that it would reschedule yesterday's 7 Year auction due to "technical issues."
Moments ago this auction finally priced, this time without any drama, and what a difference 24 hours makes.
While yesterday the 7 Year was trading at about 1.43%, moments ago it priced at a yield of 1.568%...
Today's current inflation data dump from across the European nations appears to confirm forward inflation expectations trend (plumbing new record lows). With a considerably bigger than expected decline in prices , pushing Germany, Spain, and France back into deflation, pressure is mounting on Mr.Draghi. As one EU economist exclaimed, "the data send a clear message to the ECB and the only question that remains now is how bold action would be."
Germany tumbles back into deflation...
Amid the biggest weekly drop in GBPUSD (cable) in 7 years, a surge in UK credit risk, and a spike in cable volatility, Brexit risk has never been higher, but, as Citi notes, is only 30% priced in at current levels (while polls are more 50-50) even as The British Pound is plumbing 30-year lows versus the U.S. Dollar.
With Wall Street consensus expecting the poor first Q4 GDP estimate of 0.7% to be revised even lower to 0.4%, and with Wall Street's biggest former permabull Joe LaVorgna expecting a number as low as 0.1%, instead it received a surprising jolt to the upside when the BEA reported that instead of a decline, Q4 GDP was actually revised higher to 1.0%.