EuroDollar

5-Year Treasury Yield Tumbles Below 2.00% As Short-Squeeze Picks Up

Five-year Treasury yields have tumbled back below 2.00% to the lowest levels in almost three-weeks, extending the drop amid the weakest economic growth period for a rate-hike since 1980. With net positioning near record high shorts, and everyone and their pet rabbit sure that a breakout above 2.15% was 'inevitable', we wonder what happens next.

Guess 'Who' Just Figured Out The Fed Is Behind The Curve

"It’s like the Federal Reserve is Wayne Gretzky’s poorly coordinated older brother. Instead of skating to where the puck is going, the Fed can’t even skate to where the puck is, and is instead busy skating to where it has been."

Traders Throw In The Towel On March Rate Hike

As we previously noted, while speculatrs had been reducing their shorts in Treasury futures, they had added to Eurodollar shorts - pushing their bets on Fed rate hikes to record highs. However, as Bloomberg notes, signals are starting to emerge that traders who built up that heavy short, or hawkish, eurodollar base since the start of 2016 could be starting to throw in the towel on a March Fed rate hike.

The Market Is Not The Economy, But Earnings Are (Closer)

"... share prices, in general, operating on the far end of the probability spectrum; where everything has to go just right in the near future, including whatever may come out of Trump “stimulus” and economic policies. EPS, however, suggests, as the calculations for GDP potential, that that would be a very low probability outcome, including a high risk of “something” going wrong all over again just like it was in 2014."

The Chart That Should Worry Janet Yellen The Most

Traders in the fixed income and money markets are losing their religion. Slowly but surely, beginning at the long-end, record short speculative positioning in US bonds is being unwound as traders lose faith in Janet and Donald's double-whammy.

The End Of The Dollar Standard

"I find myself in the strange situation of cheering Donald Trump’s nascent program of economic renewal for the US, while worrying deeply about the domino effect that may topple a dollar-based global financial system whose health has relied greatly on benign neglect by the United States."