Bunds - why does no one believe in new lows? Chart says 1% Germany by August..

It's Friday – it's time to look at longer dated chart and more unusual charts…..Today's focus Bunds, China coming devaluation and Russia.

 

Bunds

 

I have all year called for new low in DM rates despite consensus focusing on tapering…. Here is two charts both of which states clearly – baring "surprise" to upside in growth the trend is to 1% Germany rates by August!

 

 

Note where channel ends in August – sub-1% but 1.4000% is critical leve..

 

More importantly – the long term view:

 

Again 1.0% Germany & inside 2014….. also 1.4000 the support level for now…(A mere 10 bps from here=)

 

 

Remember our projection on Bunds have been based on our JABA model (Econo-physic) model which indicated back in Q4 that Germany could face close to zero growth by Q4 in 2015.

 

Finally,

 

My longest used chart for fixed income – confirmation is coming soon…..30 YR to 2.50%

 

 

Remember this trend has continued despite 100% of macro strategist thinking US rates will be higher in six month time – despite extreme low volatility & complacency – despite the so called: Great rotation. Of course it reflects deflation, lack of growth and extremely poor policy responses, which this morning was indirectly admitted by Yellen:

 

 

Yellen concerned Fed model offers distorted prediction on prices

 

Yes, the policy makers talk, but market clearly disagree, especially the bond market.

 

Imagine if Russia/Ukraine "really" is at true geopolitical risk, if lowflation is not transitory, if growth does not come back again this year, if central banks have not alternative at zero bound, if Draghi is bluffing (as he often does)….., if China devalues…. ?

 

No, it will never happen. We have great diplomatic efforts on Russia, central banks understanding the true economy and politicians who are committed and fully in line with the real economy, plus an extremely strong bank sector – The King is dead, long live the King….

 

Greed is good – Leeman BrothaZ

 

Nice weekend

 

Steen

 

 

 

Med venlig hilsen  |  Best regards
Steen Jakobsen  |  Chief Investment Officer

 

Saxo Bank A/S  |  Philip Heymans Allé 15  |  DK-2900 Hellerup
Phone: +45 39 77 40 00  |  Direct: +45 39 77 62 23  |  Mobile: +45 51 54 50 00

 

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FW: (BN) *YATSENYUK: RUSSIA WANTS TO START THIRD WORLD WAR

Let's continue to ignore these "subtle" change and hope the great diplomacy of Europe and US prevails..... sounds like a great strategy....

This is escalating...hour by hour.....

Could be violent weekend.

Steen



Subject: (BN) *YATSENYUK: RUSSIA WANTS TO START THIRD WORLD WAR

-------------------------------------------------------------------------------
+------------------------------------------------------------------------------+

BFW 04/25 08:36 *UKRAINE URGES RUSSIA TO KEEP PROMISES, CONDEMN EXTREMISTS: PM

BFW 04/25 08:34 *UKRAINE WILL CONTINUE TO COMPLY WITH GENEVA ACCORD: YATSENYUK

BFW 04/25 08:33 *YATSENYUK: RUSSIA HAS DONE NOTHING TO IMPLEMENT GENEVA ACCORDS

BN 04/25 08:32 *UKRAINE PRIME MINISTER YATSENYUK SPEAKS AT GOVT MEETING

BFW 04/25 08:31 *YATSENYUK: RUSSIA WANTS TO REMOVE UKRAINE'S PRO-EUROPEAN GOVT

BFW 04/25 08:29 *UKRAINE GOVT URGES CENTRAL BANK FX SALES TO POPULATION: SHLAPAK

+------------------------------------------------------------------------------+

*YATSENYUK: RUSSIA WANTS TO START THIRD WORLD WAR
2014-04-25 08:32:33.520 GMT

--PAUL ABELSKY

-0- Apr/25/2014 08:32 GMT
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Macro Digest: We must accept finite disappointment, but never lose infinite hope. Martin L. King

Easter is over, volatility reaching new lows and complacency new highs:

 

Today's macro is mainly "other people's" ideas as I have said plenty on my views, but I trust you will all of the below links and articles of interest, but first here is my base scenario:

 

·         Fed will taper the tapering by Q3 – end Tapering

·         New lows in yield will be reached this year and early 2015

·         The biggest policy mistake this year will be fighting deflation exactly when marginal wage pressure is rising…….

·         Stock market will sell of 25%-30% in H2 2014

·         2014 is the low in business cycle – low in inflation, productivity, wages – high in complacency, misguide macro policy, and unemployment – in other words: 2015 H2 is the "real recovery" including inflation….

·         Volatility is major buy here – conflicting signals on monetary policy, geo-political risk and waiting for Godot is offsetting each other creating false sense of stability…..

 

Light positioning: Sold GBPUSD 1^st time in months today above 1.6800 – short AUDUSD now – RBA minutes was my CATALYST for selling – LONG, very Long fixed income……

 

======================================================

 

Against this stands CONSENSUS:

 

100% of economists thinks yields will rise within six month

 

Housing starts – which according to consensus will add 0.5%-0.8% to GDP in the US continues to tank:

 

Higher resolution link via Twitter:

 

 

My favorite economist – hard to find! – John H. Makin: Now is the time to preempt deflation

 

Great tool to see where Economic Dashboard is trading relative to average:  Economic Indicators Dashboard

 

Finally,

 

Marginal wages are now rising in Japan, US, UK, parts of Europe & China. Don't forget that one child policy ultimately leads to less working people than retired people, shifting the burden of cost from capital to wages – we are starting to see WAGES pressure on the margin, not due to an improved economy, but mainly due to demographics…. Politicians will misinterpret this…….but in 2015 the compounded impact could be inflation +4% in the US!

 

The one child point was made by Michael Hasenstab of Frankin Templeton in his piece on EM:  Separating the Wheat from the Chaff, an excellent short commentary with some valid points on volatility and wages….

 

Enjoy the Real Madrid vs. Bayern Munich today – a clash of titans… may the best team win …….

 

Safe travels,

 

Steen Jakobsen

 

 

Med venlig hilsen  |  Best regards
Steen Jakobsen  |  Chief Investment Officer

 

Saxo Bank A/S  |  Philip Heymans Allé 15  |  DK-2900 Hellerup
Phone: +45 39 77 40 00  |  Direct: +45 39 77 62 23  |  Mobile: +45 51 54 50 00

 

Research: http://www.tradingfloor.com/traders/steen-jakobsen

Please visit our website at www.saxobank.com

 

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Remember... It's Tuesday

Feed: Zerohedge
Posted on: Tuesday, April 22, 2014 3:55 PM
Author: Tyler Durden
Subject: Remember... It's Tuesday

 

Presented with no comment...     h/t @Not_Jim_Cramer   It's Tuesday!! 66% chance of green for the Dow in 18 months...   and 73% winning rate in 2014

View article...

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Market wrong to think Euro crisis over: UBS Chair. & Ray Dalio's take on risk (April 3rd - 2014 update)

Not brand new, but do listen to it. Weber is connected and opinionated – note his comment on 5yr Spain and US trading  same level!

http://www.cnbc.com/id/101579100

&

http://bridgewater.dailyobservations.com/medias/ugj1eu8ajb

 

 

Med venlig hilsen  |  Best regards
Steen Jakobsen  |  Chief Investment Officer

 

Saxo Bank A/S  |  Philip Heymans Allé 15  |  DK-2900 Hellerup
Phone: +45 39 77 40 00  |  Direct: +45 39 77 62 23  |  Mobile: +45 51 54 50 00

 

Research: http://www.tradingfloor.com/traders/steen-jakobsen

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IMF: Doing an April's fool? Market is OW US...and too much so.....

IMF sees the US leading the world is growth – the breaks is off – apparently…..but why is Surprise Index then making new lows?

 

http://tinyurl.com/cqkvhlg

 

 

 

Personal note:

 

Everyone, and I mean, everyone I have met in the last three month is Overweight US stocks based on more growth, best of worst, but asset return from the US market reflects the above chart and my personal view that rates going lower due to much lower growth in the US than perceived..

 

Year to date performance is not really what the doctored ordered in December is it?=

 

 

Med venlig hilsen  |  Best regards
Steen Jakobsen  |  Chief Investment Officer

 

Saxo Bank A/S  |  Philip Heymans Allé 15  |  DK-2900 Hellerup
Phone: +45 39 77 40 00  |  Direct: +45 39 77 62 23  |  Mobile: +45 51 54 50 00

 

Research: http://www.tradingfloor.com/traders/steen-jakobsen

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Macro Digest: 30 Year US interest rates to fall 150 bps - FI only asset positive by end of 2015

2014 started with high expectations on growth - IMF, World Bank and ECB was falling over themselves to upgrade growth forecast for 2014 in early January but by now Q1 growth in the US is expected to come in @ +1.9% after the initial +2.6% advertised by the pundits in late 2014 (Bloomberg December 12th, Survey) - This despite Q4 (the base line) being revised considerably down from 4.1% Initial, then to 3.2% in advanced and ending at 2.7% in final count. (37% drop from early to final number)...... This apparently is entirely due to weather....

But... fixed income market seems to have a different opinion:

This is my long term chart which have maximum one signal per year if that:

The model has been good in calling bigger trend changes, the last one being end of December 2012 where it bought on the close @ 2.94% yield. It's now getting ready to sell off indicating that the bond market "disagree" more and more with the assumption on weather....

Furthermore my gauge for central bank policy: The GDP weighted G-10 1 year interest is also making noises to the downside, although less so than long term interest rates....

The point here being that despite hearing daily from both investors and other strategist's that: "We are in clear recovery on growth and that 2014 will be a good year for stock market again".....I remain extremely disappointed on the REAL PROGRESS made in terms of structural and cyclical improvement in key indicators.

Housing market no longer supports growth - This is 30 Year mortgage rates inverted(down mean higher rates) vs. Building permits:

With the introduction of tapering - the FED indicated less willingness to expand balance sheet - this chart shows the NET % change year-over-year one year back. Looking further back will not work as it's the May 2013 Tapering indication by Bernanke which create the "macro impulse change":

 It's still expanding the balance sheet, but the "momentum" is waning and fast.........

It's important for me to point out that seeing new lows in yield does not imply that I am a Super Bear on world as Ambrose Evans-Pritchard said in his blog the other day:  Bond yield to hit fresh lows as world recovery wilts, growls Saxon Bear 

It does mean that I believe the recovery or healing will be delayed into 2015 (It's a 2015 story not a 2014). Our model sees Q2-2015 as the real turning point, but more importantly presently the market is the most consensus it has been for the least amount of real data supporting it since crisis in 2009. (Where market was the other way around)....

 

The world is in rebalancing mode which hurts growth in most of the world:

·         Asia and China needs quality growth to substitute nominal growth on over investment

·         The US current account is falling mainly due to less energy import leaving massive "hole in the ground on consumption" for rest of world

·         Europe has not even started to address it fundamental lack of reforms - presently Europe is trying to sell implications of low interest rates as recovery, a mistake similar made in Australia. Low rates are there for a reason or rather two:

1. Low growth and no visibility for improvement in business investment and consumer demand.

2. Deflationary forces of lack of technology/innovation (Link) and a global depression

If the recovery was real and deeply rooted unemployment would be dropping, business would be investing in further capacity and most certainly the consumer would be out buying goods. No, the bond market remains the most steady hands of all markets and assets, and my conclusion remains the same:

Fixed income will be only asset class giving a positive return in 2014 - leading to both inflation and growth from Q2- 2015 as our rule of thumb of nine month lag from interest to the real economy will mean that the low rates seen over this summer will be positive for Q2- 2015.

The world is barely growing at zero policy interest, if anything the disinflation says lower growth is coming, so the path of least resistance is lower rates first as policy makers continue to believe "guidance on interest rates" is more important than real changes.

 

 

Med venlig hilsen  |  Best regards
Steen Jakobsen  |  Chief Investment Officer

 

Saxo Bank A/S  |  Philip Heymans Allé 15  |  DK-2900 Hellerup
Phone: +45 39 77 40 00  |  Direct: +45 39 77 62 23  |  Mobile: +45 51 54 50 00

 

Research: http://www.tradingfloor.com/traders/steen-jakobsen

Please visit our website at www.saxobank.com

 

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