Business

While the odds of a rate hike have collapsed since The Fed's decision to hike rates in the middle of an industrial and earnings recession, the odds of a rate cut remain non-negligible.

As investors await the Fed’s announcement following today’s FOMC meeting, Bloomberg's Richard Breslow they have a conundrum. No change in rates is expected. That is pretty much taken as a given. But we have to add the sub-clause: in either direction. What an interesting concept.

While many were surprised when yesterday's 2 Year auction saw absolutely blistering demand, including a near record Indirect take down and a yield stopping deeply through the When Issued, none of that was on display in today's 5 Year auction which concluded moments ago when the Treasury sold $35 billion of Cusip N89 at a yield of 1.496%. The problem: this was 0.9 bps wide of the When Issued and the biggest tail since June 2015. Then again, as SMRA notes, "Five-year note auctions have a tendency to stop fairly wide of the 100pm WI bid side though - in both directions."

Submitted by Pater Tenebrarum via Acting-Man.com,

Gross Output Remains Under Pressure

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

If the risk-on euphoria of punters borrowing billions of dollars in margin debt doesn't materialize, stocks could languish for years after falling 50%.

The financial service industry's Prime Directive is to exploit humanity's core drives of Greed and Fear. Financial service companies promise high returns (fulfilling our greed) that are low-risk, i.e. "safe" (placating our fear of losing our nest-egg).

Some interesting observations by the Goldman sales and trading desk:

Every sector closed positive today with the biggest theme being the reversal in Momentum (SPX +1.4% vs our Momentum pair -2.3%) driven by outperformance of the Short Momentum basket (Long Momentum +99bps vs Short Momentum +3.3%). This is the momentum pair’s largest underperformance YTD and the 5th largest underperformance over the past  2 years. Below shows 1D, YTD and 12M performance of S&P Level 1 sectors.