Thanks Europe, you saved our arse this week from our own political incompetence. Outside of the very short term logistics issue with a possible delay in Government payments where the overnight repo rate, overnight LIBOR and 1 month T bill yields all were higher on the week, further out securities and the US$ had an ordinary week. This notwithstanding the drama in DC thanks to concerns with Spain and Italy and also following some worrisome economic commentary from US companies on the global outlook. From last Friday’s close, the 2 yr yield is up just 1.5 bps, the 5 yr yield is down 2.5 bps, the 10 yr yield is down by 5 bps and the 30 yr bond yield is lower by 3 bps. The 2 yr and 10 yr swap spreads are up less than 1 bp. Also, the euro heavy US$ index is up on the week by .20. The US$ is even up against the CAD. Thus, the weakness in US equities this week can be argued to be much more attributed to the concerns with global growth which was emphasized by some big multinational company commentary. Markets seemed to have blocked out the torturous hyperbole and focused more on the changing economic fundamentals.
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