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Market Roundup: Volatile First Half on Policy, Data and Geopol Risk

US TSYS
Volatile early first half, whippy price action after extending past overnight lows in early NY trade from nearly testing highs and now extending lows w/ 30YY tapping 3.2577% high. Several factors at play include policy headlines, geopol risk and data both domestic and foreign:
  • Latest reversal in rates: Today's JOLTs number surprised by 864k to the upside - that's the fourth largest upside surprise of the past decade (only beaten in April 2021, May 2020 and July 2021). Data likely to give the Fed confidence at their upcoming policy meeting for a large move, particularly if backed up by strong Aug employment read this Friday (+300k est vs. +528k prior).
  • Prior risk-off bid (that also spurred lows in stocks (ESU2 -43.0 at 3988.0) on uptick in China/Taiwan tensions for risk-off move: headlines re: Taiwan fired warning shots at China drone spotted near an offshore island.
  • Earlier: Tsys paring gains as Richmond Fed Barkin continues to discuss economic outlook, "RECESSION IS RISK IN GETTING INFLATION UNDER CONTROL .. DOESN'T EXPECT INFLATION TO COME DOWN IMMEDIATELY, Bbg.
  • Additional selling across the board on ECB'S KNOT comments/headlines since top of the hour contributing to Tsys paring gains: SAYS NOT CONVINCED THAT GOING BACK TO NEUTRAL ENOUGH .. MARKET PRICING OF RATE HIKE IN SEPT NOT UNWISe .. LEANING TOWARDS 75 BPS BUT OPEN TO DISCUSSION, Bbg.
  • Meanwhile, UK Gilt yields climbing to mid-2014 levels, 10Y 2.75%, 30Y 3.03% as Goldman Sachs analysts warn "UK inflation could top 22% next year if natural gas prices remain elevated in the coming months", Bbg.
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