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29 May 2013
Flash: US leading the way for the global economy - Societe Generale
FXstreet.com (Barcelona) - Kit Juckes, Global Head of Currency Strategy at Societe Generale notes that bond yields up, equity prices up, dollar up, spreads tighter.
He comments that bond, currency, credit and equity markets send a very simple message just by the way they traded yesterday - the US is leading the way for the global economy, powered by housing and causing a continued re-calibration of global bond yields which is unambiguously dollar supportive.
He feels that market pricing rarely paints quite such a simple picture, “and when they do, it doesn't usually last.” However, he adds that the rates re-calibration and the dollar rally are core themes for 2013 and beyond. At a rough guess, he writes, “I'll suggest we will see a dollar rally, albeit a shallow one, for the next five years. As for Treasury yields, the rise may be bumpy and even shallower, but we're on our way to new normal, wherever that is, my best guess being a 10yr Note yield that gets above 4pct in due course.”
Additionally, Juckes comments that the US housing data make the press headlines. He feels that prices are running ahead of activity which isn't ideal, except for home-builders' profits, and confidence is improving. He writes, “Today's mortgage applications will tell us little. I expect the Treasury sell-off to continue for a while only because there are too many people on the same (wrong) side of the trade. I remain nervous about what June brings for spread markets, and can point to an SG sentiment indicator deep in risk averse territory to justify my fear, though without news I may just have to ignore a further SPX grind higher, I suppose.”
He comments that bond, currency, credit and equity markets send a very simple message just by the way they traded yesterday - the US is leading the way for the global economy, powered by housing and causing a continued re-calibration of global bond yields which is unambiguously dollar supportive.
He feels that market pricing rarely paints quite such a simple picture, “and when they do, it doesn't usually last.” However, he adds that the rates re-calibration and the dollar rally are core themes for 2013 and beyond. At a rough guess, he writes, “I'll suggest we will see a dollar rally, albeit a shallow one, for the next five years. As for Treasury yields, the rise may be bumpy and even shallower, but we're on our way to new normal, wherever that is, my best guess being a 10yr Note yield that gets above 4pct in due course.”
Additionally, Juckes comments that the US housing data make the press headlines. He feels that prices are running ahead of activity which isn't ideal, except for home-builders' profits, and confidence is improving. He writes, “Today's mortgage applications will tell us little. I expect the Treasury sell-off to continue for a while only because there are too many people on the same (wrong) side of the trade. I remain nervous about what June brings for spread markets, and can point to an SG sentiment indicator deep in risk averse territory to justify my fear, though without news I may just have to ignore a further SPX grind higher, I suppose.”