Table of Contents:
A Brief Introduction
Macro
FX
Rates
Notes from the Street
A Brief Closing
A Brief Introduction-
Hello everyone, today I will be posting the second iteration of ‘This Week in Charts’. If you missed the first edition here is a link to it below. Please check it out if you have yet to do so and any feedback in the comments is always welcomed.
I hope I will be able to post a weekly edition of ‘This Week in Charts’ I apologize for the sporadic posting. Here is my current tentative schedule for Celeritas Capital Substack, bi-weekly posts of ‘Fixed Income Fixing’ (again you’ll find a link to the most recent below). As mentioned before ‘This Week in Charts’ will be posted weekly. Primers across a variety of topics along with anything else that I’m interested in writing about will be posted more sporadically.
To wrap up this introduction I want Celeritas Capital to add actual value and share knowledge. Specifically for ‘This Week in Charts’ I want this series to be a lot more than the common charts you’ll see on Fintwit or Zerohedge. (Not that there’s anything wrong with that but it has been done many times) I hope to achieve this goal if you have any tips or criticism I welcome them in the comments below or via email. Now onto the charts!
Macro:
To begin this weeks Macro section we will be taking a look at Credit Default Swaps (CDS). Below in Figure 1 is the 5Y CDS spread for a variety of instruments including High Yield (HY) and Investment Grade (IG) bonds for both the US and EU. Along with a combination of CDS for the majority of Sovereign nations. (Figure 1) We will look closer at individual Countries CDS next. Also of note is the large spread between US and European HY bonds.
Figure 2 shows the 5Y CDS for Japan, the United States and Italy. Again with the threat of a Government shutdown on the horizon we can see the US CDS spiking when compared to its peers. (Figure 2)
Now I would not be able to do a Macro section without touching on the horrible events currently unfolding in Palestine/Israel. The killing of noncombatants is always inexcusable and a heinous act. The current trajectory of the events currently unfolding in Palestine/Israel is still unclear, this could last for months and drag in other Nations. Figure 3 below shows the past performance of assets during past Wars in Gaza. Unsurprisingly the Swiss Franc (CHF) weathered these past geopolitical events extremely well. (Figure 3)
Figure 4 from Bloomberg details three possible scenarios on how the current Israel-Hamas conflict could play out along with the impacts on markets and the global economy. I personally think the most likely outcome is the Proxy War outcome of the three. (Figure 4)
FX-
Figure 5 is from am/FX by the amazing
. It shows just how crowded the long USD trade has become. (Figure 5)Rates-
Now onto rates my favorite market at the moment. To get started with rates I would like to touch on TLT 0.00%↑ and duration. TLT 0.00%↑ has seen constant call buying these past few weeks along with dip buyers. The record call open interest can be seen in Figure 6.
Figure 7 below shows that the dip buyers for TLT 0.00%↑ are still coming in strong. Why am I bringing up TLT 0.00%↑? Well for most retail traders TLT 0.00%↑ is the easiest or only way to trade long duration Government bonds. If you are long TLT 0.00%↑ or other long duration fixed income hopefully these next charts will help inform your trade.
I think Figure 8 lays out a solid bull and bear case for UST yields rising in the next 12 months. I personally do not like forecasting a year ahead for UST yields but I am fairly confident that yields especially the long duration UST yields will increase into Q4 2023 and likely into Q1 2024. Long story short, in my opinion going long duration bonds now probably won’t be a great trade (Figure 8)
Along with those reasons to be careful going long duration, we have another reason below illustrated by Figure 9. During 2024 we will see large Treasury auctions across the yield curve, with 30Y USTs increasing 23%. (Figure 9)
Notes from the Street-
This section will be a sort of speed round, I will not be including my own commentary in this section. Instead as you have guessed from the name I will be sharing research from the big Wall Street firms.
A Brief Closing-
A big thank you to all my new subscribers, Celeritas Capital has gained 20+ new subscribers in the last 30 days. It is truly humbling to have anyone read my work, I also truly appreciate those who are active in the comments it makes Celeritas Capital feel more like a community which is my goal! And as always feedback is welcome in the comments, thank you for reading if you made it this far consider sharing this post!
DISCLAIMER: We are not Financial Advisors, and all information presented is for educational purposes ONLY. Financial markets can be highly volatile, so good risk management is a must.
great coverage, thank you!