At almost 90% of GDP, the Bank of Japan’s balance sheet is just bat shit crazy! No other way to describe it…
Authored by Kevin Muir via The Macro Tourist blog,
Today’s post will have no answers. I am not sure anyone truly understands the strange day to day squiggles of the increasingly intertwined global financial system, but I wanted to highlight a relationship that cannot simply be monkeys typing Shakespeare.
Let’s start with the market developments over the past couple of days. Last week ended on a trading holiday, with markets closed for Good Friday. Weirdly, the U. S. Federal Government does not take the day off. With Wall Street deserted, there were a bunch of economic releases that shit the bed. Yup, they were not good.
I took the liberty of lifting a couple of charts from ZeroHedge that sum up the extent of the economic miss:
As traders huddled around their screens Easter Sunday evening, it was no surprise that U. S. Treasury futures were indicated to gap higher. When the opening bell rang for the GLOBEX session, the Five Year T-Note future opened up almost half a dollar (a big move for a five year note) on massive volume of more than a billion dollars in the first two minutes.
Nothing really surprising about that move. After all, there is a monster speculative short position at the front end of the yield curve.
But after the big emotional gap open, the price of all U. S. fixed income drifted lower.
Maybe this could be the result of thin holiday conditions. For most of the night, prices meandered around, so it makes sense to not read too much into the moves.
But once U. S. traders returned to their turrets this morning, prices continued moving down. Strange. Maybe this was an ‘all-baked-in’ situation where the weak CPI and Retail sales data were anticipated?
Yet today’s economic data once again disappointed expectations.
