Jeremy

Greatest city in the world

Vibe shift in USD continuing, as US exceptionalism narratives take hold. US now the clear country with the best growth fwd, and now the mkt has come to terms with a hike (u6 pricing 12.5!) EURUSD vs 5y real rates shows a huge divergence. It’s all driven by $ RY going up May

@Sergei1544 Yep. Makes directional trading tricky and so prefer looking at more Vol/RV structures. The easy trade is over imo.

@JeremyWS Depend on oil from this moment, no?

Sometimes the chart voodoo works. Sfrz7 bounced at 96.00.. US10y back flirting with the major trendline. Lots of bad shorts at bad levels sets up squeeze potential. 4.45/50 area 10y might make sense to reload. Destination still for higher rates imo, but we’ve moved fast.

@RobertTimper1 What do you have for today’s core CPI seasonally adjusted ? Smth like 0.3? Thanks mate

Does the UK still have an inflation problem? After yesterday's wage growth data and today's inflation data, the underlying inflation picture at least doesn't look different from DM peers.

@IyerC Saints.

@JeremyWS Why come?

A sad day

@sunchartist Got a bit busy this afternoon lol… have the bund and JGB hedged into USD handy, (vs UST10yr).. you can infer relative attractiveness for JPY domiciled from the 3 comparatively

@JeremyWS Thank you. Can you look at uss and German bonds swapped in jpy. I am wondering how much demand for foreign ccy bond fall give rise in yen nominal rates

I think under appreciated in JPY rates is the speed and direction of travel of Inflation swaps. 5y up to new highs today, up 70bps since the war, and 35bp this month! BoJ falling further behind the curve. GDP overnight allays immediate concerns for June. But more is needed.

@sunchartist Unless that’s not what u wanted. Lmk , always got time for you

@sunchartist Hedged JGB back into USD… 10y JGB xccy hedged (full terms) at 4% For the most spice, a 40y JGB, hedged with 1yr xccy is 6.8%!!

@cchengasaurus Yeh that’s the bit on the payoff matrix where you lose bad… For me it’s the least likely path of what can actually happen. But who knows! I wouldn’t rec anywhere sofr personally. Trade mostly pushed there is sep/oct/dec fomc fly.

@JeremyWS thanks for the idea. Guess largest risk is ecb hikes b2b and boe continues to hold (-28.5bps) or BOE goes in June and that brings down odds for going again July. maybe better to Pay the July BOE gap vs rec SOFR july?

Global rates pausing at the big trendlines.. so instead of focusing on outright delta, time to look around the edges for trades. July MPC gap trades less than 1bp over July ECB gap. Modal paths are for Jun+Sep from ECB, and a “not cycle” hike from BoE at July.

@Augustus_kaizer Sure, just subjective to the whims of the market on any given day and time… What do you see as the modal path here? Which is the bit you disagree with most?

@JeremyWS Modal implies a distribution, which implies volatility. You can use rates vol to literally find the modal path. No subjectivity.

@Augustus_kaizer This is twitter my guy. Gotta keep it simple… In any case, wasn’t referring to market implied. But simply my own most likely path.. (And that of about 90% of people i speak too)

@JeremyWS You need rates vol to compute modal paths for ECB and BoE policy rate paths. Not doable with just underlying instruments as you're showing.

@PatrickBasiewic @pdegrauwe Agreed. Completely misses the point tho. UKT does not borrow at a higher rate than French treasury. BoE sets a higher policy rate than ECB does. The author almost gets there in the piece, but fumbles it at the line.

@JeremyWS @pdegrauwe Hi. Interns also know that Uk needs GBP for spending and Europe needs Euros… and they know how IRP works

Why does the UK government carry a higher interest burden than the French government? open.substack.com/pub/pauldegrau…

@JuliusProbst @pdegrauwe Yep exactly! I gave the author the benefit of the doubt that it was either a typo or English translation error… context of the blog was for yields, not burden, but yes, if referring to burdens then the analysis is even more wrong! Hilarious eh

@JeremyWS @pdegrauwe Lol, this is basically irrelevant for the debt burden. interest rate burden UK ~3.6% of GDP, France ~2.5% with roughly similar debt level

@WinMonroe @NewLeftEViews Indeed, someone needs to do it, and no better than Toby at it!

@JeremyWS @NewLeftEViews On the discourse, Toby Nangle at FTAlphaville has been doing gods work trying to bring good bond chart hygiene back into vogue

From a master on the political economy of monetary policy: “One wonders what the political agenda of the Bank of England was to put so much pressure on its own government, while other central banks, in particular the ECB did not do so. This is all the more surprising because the Bank of England failed to contain inflation, and then acted as a super bond vigilante punishing its own government with higher interest rates.”

@WinMonroe @NewLeftEViews The author was so muddled in his writing… he *almost* got to a reasonable answer… (which would be comparing Real yields on the bonds)… alas he just couldn’t find it. Shame… I really thought this tragic discourse of comparing yields died out in the eurozone crisis.

@NewLeftEViews good time to reasses it. I suspect they were concerned about "financial dominance" but rebalancing once inflation was credibly declining would have been better in retrospect imo. Also, there are some methodological issues with this comparison: x.com/JeremyWS/statu…

@dMacro_dBS Thanks mate

@JeremyWS Great calls man. Keep it up!

Great week for the core rates view… 2027 dates across the world leading the sell off… and fed hikes finally part of the debate We got to ~4.60 10y and 96.00 SFRZ7 much quicker than anticipated. ER u6u7u8 fly up at 27 and GBP rates immolated (but for very different reasons!!)