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Dentalfloss · Mar 24, 2020

Dentalfloss · Mar 24, 2020

Good Morning: The Long & the Short of it and The Bigger Picture - 24 March 2020 - ADM ISI

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Ostwald, Marc

07:55 (13 minutes ago)

to Marc

- Array of surveys (flash PMIs, Ifo, CBI, regional Fed) in focus as Fed
confirms role as primary central counterparty and market maker

- Fed measures should help, but flows still the ultimate arbiter, and
lack of any economic visibility near term a massive hurdle

- Some thoughts on where markets and economies stand via a recording of
'The N@ked Short Club' last night on ResonanceFM.com -
https://www.mixcloud.com/Resonance/the-naked-short-club-23-march-2020/

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** EVENTS PREVIEW **
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As forecasters appear to be falling over themselves to offer total Armageddon forecasts for the global economy, today offers the March 'flash' PMIs from the G7 & Australia along with the UK CBI Industrial Trends and the US Philly Fed Services and Richmond Fd surveys. Consensus forecasts are doubtless worth very little, other than to suggest 'record' falls across the world, which would be wholly unsurprising; the more salient point is next month's readings could easily be worse, given the lack of visibility on a peak in the spread. Just as importantly there is the question of when the broad spectrum of 'lockdown' measures will still start to be lifted, in itself a major risk if decisions were to be taken too quickly in the hope of getting economies back on their feet more rapidly, and then suffering a resurgence in the spread of the virus. For markets, the deluge of central bank support measures, above all the Federal Reserve, confirm central banks are now central counterparties and market makers, that should offer some semblance of stability, however they will not arrest the outflows from retail and investment funds of most descriptions, as the short-lived relief rally in corporate CDS indices and ETFs (above all HY) in response to the latest Fed moves on "unlimited QE" and corporate bond purchases attested. Indeed the bid/offer price widening (to 1.5 to 2 points) in 'off the run' long Bonds in reaction to Mnuchin warning about a surge in US 30 year issuance again underlines that the only 'buyers in town' are the Fed and central banks in general, and the curve steepening pressure is also seemingly relentless. The very simple message is that these remain flow driven markets with passive flows still very much in the ascendancy and self-reinforcing as THEY have always has been; the analogy of the dog chasing / biting its own tail remains seems very apt, and works in both directions.