Macro Minutes

The main story in financial markets is fixed income and the relentless surge in yields. We explore why yields have been rising and curves steepening, whether this trend can continue, or what are the necessary ingredients for a turnaround.Participants:Jason Daw (Desk Strategy), Head of North America Rates StrategyBlake Gwinn (Desk Strategy), Head of US Rates StrategyLori Calvasina (Research), Head of U.S. Equity Strategy Peter Schaffrik (Desk Strategy), Head of UK/European Rates & Economics Adam Cole (Desk Strategy), Chief Currency Strategist* Research Analyst opinions are their published views, independent of those expressed by Desk Analysts

We have a number of central bank events on deck, with the ECB meeting this week, followed by the Fed and BoE next week. Overall, it seems like it’s coming up on closing time for global hiking cycles, but major central banks may be looking to get one last round of hiking in before the end.Participants:Blake Gwinn (Desk Strategy), Head of US Rates StrategyCathal Kennedy (Desk Strategy), Senior UK EconomistSimon Deeley (Desk Strategy), Canada Rates StrategistAdam Cole (Desk Strategy), Chief Currency StrategistSu-Lin Ong (Research), Chief Australia Economist* Research Analyst opinions are their published views, independent of those expressed by Desk Analysts

Ouch! Bonds have been burned in low liquidity summer markets, adding to the pain (total return losses) of the past two years. The move in bond yields is not unjustified based on fundamentals (now) but the level seems unsustainably high for the future evolution of macro. But can bonds rally in the face of a positioning overhang?Participants:Jason Daw (Desk Strategy), Head of North America Rates StrategyBlake Gwinn (Desk Strategy), Head of US Rates StrategyPeter Schaffrik (Desk Strategy), Head of UK/European Rates & EconomicsAlvin T. Tan  (Desk Strategy), Asia FX Strategist* Research Analyst opinions are their published views, independent of those expressed by Desk Analysts

With key central bank meetings due over the coming weeks at the same time, as economic sentiment data is weakening, the question of 'How Long Will It Take?' until rate hikes feed through into the real economy has become more prominent again lately. Meanwhile, the very same question is also asked in China, with the opposite effect in mind. In this episode, we preview the upcoming rate decisions and add our thoughts on the 'how long' question.Participants:Blake Gwinn (Desk Strategy), Head of US Rates StrategyPeter Schaffrik (Desk Strategy), Head of UK/European Rates & EconomicsSimon Deeley  (Desk Strategy), Canada Rates StrategistCathal Kennedy (Desk Strategy), Senior UK EconomistAlvin T. Tan (Desk Strategy), Asia FX Strategist* Research Analyst opinions are their published views, independent of those expressed by Desk Analysts

A number of global fixed-income markets have broken higher as central banks are still left to deal with tight labor markets and core inflation that is not falling fast enough for comfort. Can the sell-off continue, overcoming lingering fears of an economic slow-down or will yields quickly pull back down into old ranges?Participants:Jason Daw (Desk Strategy), Head of North America Rates StrategyMichael Reid (Desk Strategy), US EconomistBlake Gwinn (Desk Strategy), Head of US Rates StrategyPeter Schaffrik (Desk Strategy), Head of UK/European Rates & EconomicsLori Calvasina (Research), Head of U.S. Equity StrategySu-Lin Ong (Research), Chief Australia Economist* Research Analyst opinions are their published views, independent of those expressed by Desk Analysts

Groundhog Day was a film about the same day repeating itself over and over, which has some parallels to what is happening in markets - policy rates higher, curves flattening, equities unfazed, and USD-CNY marching higher. Will this cycle continue or be short-circuited? That probably depends on what market or country you are talking about.Participants:Jason Daw (Desk Strategy), Head of North America Rates StrategyBlake Gwinn (Desk Strategy), Head of US Rates StrategyLori Calvasina (Research), Head of U.S. Equity StrategyPeter Schaffrik (Desk Strategy), Head of UK/European Rates & EconomicsAlvin T. Tan (Desk Strategy), Asia FX Strategist* Research Analyst opinions are their published views, independent of those expressed by Desk Analysts

Hiking cycles are extending or re-starting later in 2023 than many expected for the BoC and Fed, with the terminal points heavily dependent on the evolution of data in the near term. The BoE is similarly very data dependent, while the ECB looks set to extend its cycle further. Developed market economies have generally "outperformed" in the first half of the year, with expected weakness failing to materialize in hard data (so far).Participants:Blake Gwinn (Desk Strategy), Head of US Rates StrategyCathal Kennedy (Desk Strategy), Senior UK EconomistSimon Deeley (Desk Strategy), Canada Rates StrategistAdam Cole (Desk Strategy), Chief Currency StrategistAdam Jones (Trading), Head of US Credit Algo Trading* Research Analyst opinions are their published views, independent of those expressed by Desk Analysts

Debt ceiling negotiations turned out to be a lot less dramatic than many had anticipated – still to come are congressional votes – but once the smoke clears we’re left facing down the back half of the year with many of the questions investors had in January not much closer to being answered – it looks like we have seen peak headline inflation but core is proving to be stickier than many had anticipated. That has led to a reassessment of the policy outlook for the back half of the year – we discuss updated views on the Fed, BoE, ECB, BoC and RBA. The other side of the story is a buoyant equity market, seemingly impervious to hikes getting priced out. That may be puzzling or frustrating for macro investors but we discuss how the under-owned right tail in equities may signal more pain to come.Participants:Peter Schaffrik (Desk Strategy), Head of UK/European Rates & Economics Izaac Brook (Desk Strategy), US Rates Strategy Analyst Simon Deeley (Desk Strategy), Canada Rates Strategist Robert Thompson (Research), Macro Rates Strategist Elsa Lignos (Desk Strategy), Head of FX Strategy Amy Wu Silverman (Desk Strategy), Head of Equity Derivatives Strategy * Research Analyst opinions are their published views, independent of those expressed by Desk Analysts

Debt limit talks are ongoing in Washington, with financial markets already jittery on US banking concerns amid restrictive policy stances across many developed markets. Recent ECB speakers have generally noted they expect further hikes, while the BoE left the door open in its data dependent stance. BoC communication over the last month has emphasized that another hike is very possible and any talk of cuts is premature. How close "to the limit" will central banks take policy?Participants:Blake Gwinn (Desk Strategy), Head of US Rates StrategyCathal Kennedy (Desk Strategy), Senior UK EconomistSimon Deeley (Desk Strategy), Canada Rates StrategistAdam Cole (Desk Strategy), Chief Currency StrategistMichael Tran (Research), Global Energy Strategist* Research Analyst opinions are their published views, independent of those expressed by Desk Analysts

We have a number of major central banks meeting these next two weeks, including the RBA last night, the FOMC, ECB, later this week, and the BOE next week. While each of these institutions may be facing slightly different circumstances, it’s likely that all are nearing a decision point within the next meeting or two, where they have to decide whether to keep pushing against high inflation or trust that they have already delivered enough tightening to sustainably redirect inflation back to target levels. That debate may be framed by the tension between backward and forward looking frameworks. Or more specifically do you rely on backward looking data, which generally shows that inflation is still uncomfortably elevated and labor markets remain tight, or trust more forward looking, model driven forecasts that would suggest pent-up lagged effects and tightening in credit conditions due to banking stress, are already enough to pull inflation back to target?Participants:Blake Gwinn (Desk Strategy), Head of US Rates StrategyGerard Cassidy (Research), Head of U.S. Bank Equity Strategy & Large Cap Bank AnalystJason Daw (Desk Strategy), Head of North America Rates StrategyPeter Schaffrik (Desk Strategy), Head of UK/European Rates & Economics)Elsa Lignos (Desk Strategy), Head of FX StrategySu-Lin Ong (Research), Chief Australia Economist* Research Analyst opinions are their published views, independent of those expressed by Desk Analysts