Deutsche Bank

Global Bonds Plunge As "Trumpflation" Rally Returns, Dollar Jumps

After taking a one day breather, the "Trumpflation Rally" returned with a vengeance as global government bonds tumbled and the dollar rose on renewed speculation the economic outlook is strong enough to allow the Federal Reserve to hike in December (odds are now 94%). Asian shares rose, industrial metals and crude oil fell, European shares and US equity futures were pressured.

Frontrunning: November 15

  • Biggest Global Bond Rout Since 2003 Pauses (BBG)
  • Oil prices jump 3 percent on hopes of OPEC output cut (Reuters)
  • Italy polls get worse for Renzi as referendum nears (Reuters)
  • Trump will get wake-up call when he takes office, Obama says (Reuters)
  • With Priebus, Ryan’s Speakership Has Direct Channel to Trump (BBG)
  • Supreme Court now in Trump’s hands (The Hill)

Italian Bond Yields Explode To 18-Month Highs As Deutsche Sees 'Italeave' Odds At 60%

With TARGET2 imbalances at record highs, Italian bonds yields are exploding higher (despite Draghi's foot on the scales) following Trump's populist-encouraging victory just a few shorts weeks ahead of Italy's referendum vote. The probability of reform rejection (and implicitly 'Italeave') is now 60%, according to Deutsche Bank, with complexity due to the country’s growth-banks-politics nexus: disappointing growth, concerns about the banking system and the rise of populist and euro-sceptic parties.

Frontrunning: November 14

  • Trump shapes White House, hires establishment figure, firebrand (Reuters)
  • The Trump Effect: Rout in Global Bonds and Emerging Markets Intensifies (BBG); Government Bond Rout Deepens (WSJ); Dollar soars as U.S. yields spike; global shares divided (Reuters)
  • Oil pinned near three-month lows as gloom grows over OPEC (Reuters)
  • Thin Rank of Donors May Contend for Top Posts (WSJ)
  • Trump’s Election Upends Agenda for Obama’s Last Foreign Trip (BBG)

Markets In Turmoil: Global Bond Bloodbath, Currency Rout Accelerates As Stocks Erase Early Gains

Monday started off where Friday left off, with the dollar surge continuing, pushing the DXY above 100 for the first time since December, global bond yields soaring, emerging market currencies tumbling, and the Yuan slammed below 6.85 for the first time. However, where Monday is different is that while European stocks and US index futures started off far higher, E-minis have now faded the entire overnight rally and are now red for the session, on concerns that the spike in yields will cap any more stock upside.

"Markets Are Grasping At Trump's Answer To The New Normal"

"Monetary policy is no longer what’s driving these moves. Increasingly, central banks see themselves in a defensive role, reacting rather than dictating trends. The greenback’s rally is already forcing Asian and Latin American central banks to protect their currencies. More such moves may be in the offing if dollar gains continue....  But for now, after growing weary of monetary-led slow growth, markets are grasping at Trump’s answer to the New Normal."

Trump Victory Leads To Unprecedented Fund Flows; Trillions In Gains, Losses

The sharp rise in yields following the Trump victory inflicted a big loss in the value of the global bond universe with the dollar value of the universe of tradable bonds globally losing $1.2 trillion over the past week, while at the same, the value of global equities increased by $0.8 trillion; however the real fireworks were behind the scenes, where the fund in- and outflows within equity groups were truly unprecedented.

Deutsche Warns Of Imminent "Domino Impact" For Stocks From Bond Carnage, Soaring Dollar

Sharp turn taken by commodities, after U.S. bond market “took down” EM assets Thursday, will add to EM pain, Deutsche Bank strategist Alan Ruskin writes. There’s signs that higher bond yields, “knock” of stronger USD are having a “domino impact,” taking down weakest risky assets first before moving on to next weakest.

Will Trump Fire Janet Yellen? Here Is Wall Street's Response

One of the burning questions troubling Wall Street this morning is whether president elect Donald Trump plans on reshuffling the Fed, eliminating its so-called "independent" and perhaps going so far as firing or "requesting" Janet Yellen's resignation. to answer the question whether or not Yellen's role is in jeopardy, we went to the two most authoritative sources available: JPM and Goldman.

For Deutsche Bank, This Is The "Brexit Panic" Signal In Today's Election

Deutsche Bank has advised its sales and trading team to immediately report to their trading desks should Trump wins Pennsylvania and Michigan. So if Trump be is reported to be leading and/or winning the two key battleground states at 8pm, expect all volatility hell to break loose.