Latest Headlines
Banks' easy profits are about to end
America's largest commercial banks reported record headline profits for the fourth quarter, lifted by a big rise in net interest income (NII).
Japan spends trillions to defend one number
The Bank of Japan has been buying government bonds at a record pace, more than ¥5 trillion in a day, to defend its new yield ceiling, and it now holds more than half of the entire 10-year JGB market.
The inflation number the Fed secretly cares about
US consumer prices rose 6.5 per cent in the year to December, confirming that headline inflation is coming down from its summer peak.
Europe's lucky warm winter
Benchmark Dutch Title Transfer Facility (TTF) gas prices have fallen from peaks above €340 per megawatt-hour to below €80, and European boardrooms have let out a large sigh of relief.
Tech's layoffs are really about profits
Amazon announced 18,000 corporate layoffs as 2023 began, following similar cuts at Meta, Salesforce and Alphabet.
Germany's bond shortage is finally easing
Two-year Bund swap spreads blew out towards 100 basis points at the height of the collateral squeeze in 2022, as traders paid steep premiums to borrow physical German government bonds.
New Year: Everyone expects a recession. That's the warning sign
About 65 per cent of economists surveyed at Wall Street banks and independent research firms expect a US recession within the next twelve months, and that degree of agreement should worry any experienced investor as 2023 begins.
New Year's Eve: The year the classic portfolio failed
The classic 60/40 portfolio lost about 17 per cent in 2022, a historic drawdown that left wealth managers and pension trustees with nowhere liquid to hide.
Is the recession alarm broken?
The gap between 10-year and 3-month US Treasury yields inverted in late 2022 to depths not seen in four decades, pushing the New York Federal Reserve's recession probability model towards 38 per cent.
How long can shoppers keep spending their pandemic savings?
Consumer spending held the US economy up through 2022, in the face of the fastest monetary tightening in forty years.
Boxing Day: The $816bn problem of returned presents
The National Retail Federation expects US consumers to return about $816 billion of merchandise in 2022, and the post-holiday flood of returns is where retail margins go to die.
Christmas: Why markets go quiet — and fragile — at year-end
Markets slow to a crawl in the last days of the trading year, and casual observers take that for calm.
The debt bill companies have pushed to 2024
US junk bond issuance struggled to pass $100 billion in 2022, the lowest annual total since the Lehman Brothers collapse in 2008.
Japan surprises everyone, and bonds everywhere feel it
The Bank of Japan unexpectedly widened the permitted trading band for 10-year Japanese government bonds from ±0.25 to ±0.50 per cent, and bond markets around the world shook.
The Fed and the market disagree. Someone is wrong
The Federal Open Market Committee raised its policy rate to a range of 4.25 to 4.50 per cent in December and published projections showing a peak of 5.1 per cent in 2023.
Goods are getting cheaper. Services aren't
US consumer prices rose 7.1 per cent in the year to November, and markets took the figure with relief, mainly because core goods prices fell outright by 0.5 per cent on the month.
The companies that only survive on cheap money
US high-yield bond yields are hovering near 8.5 per cent.
Has the dollar peaked?
The dollar has fallen from its September peak near 114.8 on the DXY index to around 105, after a historic rise through 2022 that neatly reflected diverging monetary policy and America's stronger terms of trade.
Wages are rising — by how much depends on who you ask
Average hourly earnings rose 0.6 per cent in November, a strong monthly gain that sent bond-trading algorithms onto the defensive.
China reopens, and the world gets a new inflation problem
Markets have decided that China's eventual exit from zero-Covid will be pure good news for global inflation.
Cyber Monday: What the discounts say about inflation
Americans spent an estimated $11.3 billion online on Cyber Monday 2022, according to Adobe Analytics, a record in nominal terms for the annual shopping day.
Retailers ordered for a boom that never came
Target's operating margin fell to 3.9 per cent in the third quarter, from 8.6 per cent a year earlier, as the company cut prices hard to empty its warehouses.
Black Friday: Shop now, pay later, default sooner
US credit card balances reached $930 billion in the third quarter of 2022, according to the Federal Reserve Bank of New York's latest household debt report, up fifteen per cent on a year earlier.
Thanksgiving: Why your turkey cost 20% more
A classic Thanksgiving dinner for ten now costs an average of $64.05, according to the American Farm Bureau Federation's annual survey, twenty per cent more than it did a year ago.
The bond market is screaming recession
The gap between two-year and ten-year US Treasury yields reached minus seventy-five basis points in late November 2022, the deepest inversion since Paul Volcker was crushing inflation in the early 1980s.
Rents are already falling. Official data hasn't noticed
The shelter index in the US consumer price report rose 0.8 per cent in October, its steepest monthly rise in more than three decades, and no single line in the American economic data is doing more to mislead.
One good inflation report does not make a trend
Headline US inflation came in at 7.7 per cent for October, down from 8.2 per cent in September, and core inflation eased to 6.3 per cent.
Singles' Day: Alibaba stops showing its numbers
Alibaba did not publish its Singles' Day sales total on 11 November 2022, the first time in the festival's fourteen-year history that it has kept the number to itself.
FTX spent its customers' money. That was the business
FTX filed for Chapter 11 bankruptcy on 11 November, and its collapse will go down as one of the most brazen balance-sheet frauds in modern business.
$2trn is sitting at the Fed doing nothing
About $2.2 trillion of cash is lodged at the Federal Reserve every night.
The jobs report that contradicts itself
The October jobs report looked like a portrait of two different economies.
Why slowing down could mean the Fed goes higher
Interest-rate futures are pricing a fourth consecutive 75-basis-point rise at the Federal Open Market Committee's November meeting, which would take the policy rate to 3.75 to 4.00 per cent.
Halloween: The scariest year for bonds in memory
The US Aggregate bond index is heading for a loss of close to 15 per cent this year, which would make 2022 the worst calendar year for bond investors since the founding of the republic.
Meta's spending spree just cost it a quarter of its value
Meta Platforms' shares fell by twenty-four per cent on 27 October, wiping out eighty-five billion dollars of market value, after management said capital spending in 2023 would rise to between $34 billion and $39 billion.
Is the world's safest market becoming hard to trade?
On 12 October Janet Yellen said the US Treasury was worried about a loss of adequate liquidity in the government bond market.
Diwali: India's gold habit is weighing on the rupee
The rupee has fallen past 83 to the dollar for the first time, and India's households are about to buy a great deal of gold.
Bond investors want to be paid for waiting again
The benchmark ten-year US Treasury yield pushed through 4.25 per cent in late October 2022, and with it bond investors have started asking to be paid for waiting again.
The Bank of England takes away the safety net
The Bank of England said on 28 September that it would buy up to £65 billion of long-dated gilts to stop a collapse among UK pension funds, and it promised that the backstop would end at 5:00 PM on Friday, 14 October.
Banks are stuck holding Elon Musk's Twitter debt
When Elon Musk signed a binding agreement in April to buy Twitter for $44 billion, Wall Street's biggest banks thought they had won the underwriting mandate of the year.
Japan is fighting the dollar. The dollar is winning
Japan's Ministry of Finance told the Bank of Japan to sell dollars and buy yen on 22 September, its first such intervention since 1998, and officials tried to draw a line near 145.90.
Two jobs reports, two stories. Which one matters?
Non-farm payrolls rose by a steady 263,000 in September, evidence that American companies are still hiring briskly.
Britain learns the price of a budget nobody believed
On Monday, 3 October, the chancellor dropped the planned abolition of the 45p top rate of income tax, a retreat forced by the market's punishing response to £45 billion of unfunded tax cuts.
Rich on paper, short of cash: the pension paradox
Britain's defined-benefit pension industry spent the past week learning the difference between being solvent and having cash.
How Britain's pension funds nearly broke the bond market
The 30-year gilt yield shot above 5 per cent in late September and sterling fell towards 1.035 against the dollar after the government unveiled a fiscal package with no funding attached.
The inflation the Fed can't fix: your haircut and your dentist
The August consumer price index showed core prices up 0.6 per cent on the month, and with it the limits of monetary policy.
Buybacks just got more expensive
Companies have enjoyed ten easy years of financial engineering.
The euro falls below the dollar, and gas is to blame
Don't bet on inflation falling just because the maths says so
Equity traders are treating a slowdown in the statistics as if it were a truce in the economy.
