Flight to Safety

German 2Y Yield Plunges To Record -0.95%: Citi Explains Why It Will Keep Dropping

With the German Schatz plunging to a record -0.85%, Citi analysts write that the German 2Y yield will likely make new historic lows, no matter what happens in French politics, because the ECB needs to buy around EU80b 1-6y Germany by year-end, and as a result traders will keep frontrunning ECB purchases, pushing the Schatz well below -1.00%

Weekend Reading: Trump-eting Dow 20,000

We can only surmise how this eventually turns out. But whether it is extremely suppressed volatility, extreme long positions in small-cap stocks or historical short positions in bonds, the “rubber band” is stretched very tightly. Of course, while “Trump-xuberance” currently reigns, there seems to be nothing to worry about. But then again, maybe that is exactly what we should be worrying about.

What Wall Street Expects From Today's Payrolls Reports

With all eyes likely on wage growth indications in the subtext of tomorrow's payrolls report (following The Fed Minutes' comments on full employment), Goldman Sachs is forecasting a better-than-expected 0.3% rebound in average hourly earnings (helped by more favorable calendar effects) and a better-than-expected 180k payrolls print (albeit with a small rise in the unemployment rate). However, they are careful to note that any downside can be blamed on "a considerable drop in temperatures."

European Stocks Soar, US Futures, Euro Jump After Failed Italian Referendum

Another miraculous overnight recovery has eliminated all the bearish aftertaste from the failed Italian referendum. As Guillermo Sampere of MPPM EK put it: "After Brexit, it took three days for markets to shake it off, with Trump it took three hours, with Italy it took three minutes.The fast money, who expected markets to fall further with this outcome, are now covering their positions."

Global Stocks Drop; Futures Hints At Longest Losing Streak Since December 1980

With yesterday's, 8th consecutive decline for the S&P 500, the US equity market has now posted the longest losing streak since October 2008; and should we close payrolls Friday day with another negative print, it would be the longest negative streak since December 1980. Putting the recent slide in context, stocks are now down compared to a year ago, and are unchanged since December 2014.

Gundlach: "We Got The Bearish Signal; Stocks Are Going Down - You Can Feel It"

"We got the bearish signal," Gundlach said about the S&P 500 dropping below 2,130 on Monday. "It is more noteworthy and reinforces the bear signal that the market is down a lot today. The dam is breaking, you can feel it." Gundlach expected another 5-10% drop in the S&P 500, which closed at 2,111.72 on Tuesday.

Diversify At Your Own Risk

If one is to hedge with Treasury securities, they must also consider what happens if yields do not decline during a market correction. What if “safe-haven” securities traditionally used for hedging purposes were to lose 5% to 10% or even 20% or more?