April 15. Fixed
As you can see from the chart below it’s fixed now. The roof no longer leaks. White line is Crude Oil and red is HYG, the hi-yield etf. Identical recovery since the mid-Feb scare. There was also reassuring news from China, with Q1 GDP as expected 6.7%. However, debt growth in China is exceeding growth in the economy; incremental additions in debt are buying less GDP gains, but that’s a story for another day.
–Interesting item from Lance Roberts (link below) notes that Consumer Credit continues to grow as a % of Disposable Personal Income even as retail sales growth declines. The author suggests “…consumers are struggling just to maintain their current living standard and have resorted to credit to make ends meet.”
—In the US today we have Empire State, expected 3.0 vs 0.62 last, and Industrial Production, expected -0.1 with Capacity 75.4. Like many other data points, capacity utilization has been declining since late 2014, when it was just over 79. Yesterday’s Core CPI was only +0.1, but Jobless Claims were only 253k, indicating further strength in the labor market.
–With a headline grabbing quote, “Let them sell their summer homes”, the NYC employee pension is withdrawing from hedge funds. My understanding is that the pensions reduced their investment return assumption last September from 7.5% to 7.0. I suppose the hedge fund community might come back with the rejoinder, “Let them buy treasury bonds.” No matter what, it’s still a difficult task to generate 7% returns with a long bond yield of just 2.6%. Actually, just under 2.6% as the auction was bid through by a couple of bps and went off at 2.595. No wonder the Fed wants to juice stocks, even if it’s just through encouragement of buybacks.
–On the day, yields were up a few bps, with tens +2 at 178. Blue ED pack weakest on the board, closing down 3 bps.
