Bonds & Interest Rates

U.S. Trade Deficit With China Grows To Record High

China’s exports are down, and imports are down even further, which translates into a trade surplus for Beijing that could set Trump on an even more aggressive warpath.

With year-end 2018 data now in, China ended up with a $324-billion trade surplus with the U.S.—a trade surplus that is over 25 percent bigger than it was prior to Trump’s ascension to the throne in Washington, DC.

And that’s even with Chinese exports down. Based on Chinese data analyzed by the BBC, exports from China dropped 4.4 percent in December, compared to the previous year, and imports also fell 7.6 percent…..CLICK for complete article

Nomura: Don’t Ignore These Three Big Structural Forces

China’s yuan has surged to start the year, despite dismal economic data and dramatic easing from the PBOC. US equities have soared since the start of the year despite tumbling EPS expectations (and “little progress” on US-China trade talks). Cable has zoomed higher for a month, despite an increasingly vicious cycle of dismal results for May and her watered-down Brexit plans.

Up is down, bad is good, but water is always wet and The PPT is ever-present.

While markets remain focused on the next headline and next ultra-violent high-frequency swing, Nomura’s Bilal Hafeez warns that investors don’t quite appreciate how important some of the longer-term structural themes are….CLICK for complete article

THE WOLF STREET REPORT

Nothing Goes to Hell in a Straight Line, not even on Wall Street.

I have to admit, it was the most volatile holiday period in the stock market and the credit markets that I can remember – and perhaps in history. All kinds of crazy things happened, just when market participation was thinnest. These were crazy moves. But those crazy moves won’t be the last crazy moves…. CLICK for complete article 

The US Trade Deficit, Explained

The S&P 500 is down 5 percent this year despite tremendous year-over-year earnings growth. One of the primary factors weighing on the market: fear over the ongoing international trade war, particularly with China. President Donald Trump has repeatedly cited the U.S. trade deficit with China as grounds for the trade war….CLICK for complete article

Christmas Rate Hike

Due to the expected slowing global economy, stock market turmoil and the growing headwinds from rising interest rates, some analysts are holding out hope that the Fed might slow the pace of further hikes—even if this goes against the consensus.

It is widely anticipated that the Fed will hike interest rates again this month, which would be the fourth this year, with Fed members noting during a late September meeting of the Federal Open Market Committee that “participants generally anticipated that further gradual increases in the target range for the federal funds rate would most likely be consistent with a sustained economic expansion, strong labor market conditions, and inflation near 2 percent over the medium term”.

Looking ahead to 2019, Fed officials expect at least three rate hikes will be necessary, and one more in 2020. Fed officials expect the key rate to rise to 2.4 percent at the end of the year, 3.1 percent at the end of 2019 and 3.4 percent at the end of 2020, according to their median estimate.  CLICK for the rest of the article

This Indicator Suggests a US Recession Looming

 

New York City

One of the most reliable indicators of an economic slowdown just flashed a warning sign this week. On Monday, the yield curve between the five-year Treasury yield and three-year Treasury yield inverted, or turned negative, for the first time since 2007. What this means is the shorter-maturity bond now pays more than the longer-maturity bond, suggesting investors believe the government is less likely to service the debt it owes in three years than in five years. Such an inversion has historically portended a …Click here for full article.