Posted Aug 18, 2015 by Martin Armstrong
With the exception of the Shanghai market today — IF we can excuse a 6.5% decline — most markets were well behaved, generally speaking. European stocks were off but only modestly and the Dow is slightly down after exceeding yesterday’s high.
The U.S. dollar continued its stronger tone to Emerging Market (EM) currencies. Again, Russia and Turkey lost around 1% each. Sterling was the one gainer today against an impressive US$ performance after inflation data came in at +0.1% against an expected 0% (last seen +0.4% on the day).
In the bond markets, EM debt remains illiquid and generally well offered. European governments saw widening of peripheral’s (BTP’s and OAT’S +4bp with Portugal +7.5bp). The TY/RX spread closed this evening at +153bp.
The U.S. Treasury curve saw a 1bp steepening 2/10’s and +2bp at 2/30yrs. Few dealers are saying that it really isn’t a yield curve these days as the front-end doesn’t move (awaiting the Fed) while the long end reacts to stocks or “events”. The forwards are implying a 45% chance the Fed moves in September. The consensus is a 25bp rise.