US Treasuries, bank stocks and currencies - getting squeezed, now what?

US 10 yr Treasury bonds have had their biggest weekly jump in yields since 9/11.
Bank stocks rallying massively after Barclays declared they would not be raising additional capital and would make a profit for now.
Currencies partly recouping lost territory.

In short, it was a squeeze day.
At least that is my take on it unless it continues (funny that). Seriously, it was an interesting day and putting my bull hat on, I can see a few glimmerings of hope.

- Higher US treasury yields frees up capital, to potentially be used ahhrumm - in the stock or corporate bond market.

- It was a long time ago since we had any positive banking news whatsoever in Europe.

- Yielders actually gained ground in the currency markets and the Usd weakened.

All bullish signs for the riskaverse, lowering implied volatilites and increasing the riskappetite.
Looking at the technicals it seems we are at fairly important levels in many assetclasses, should there be a continuation of todays moves. I will observe these levels to judge the extent and the timeframe of this squeeze.



Unfortunately I do not yet believe it is more than squaring.
Once the huge monetary supply in the US finds traction, there will be massive action,(see 17 Dec "FED and the 0ish rate policy,,,,"), but I dont think we´re there just yet.

Dont have to believe the story to join the move though.

From a macro point of view, it does not look very encouraging in general, especially not in Europe. US data being the exception today. To be monitored.

One specific macro case that will not get any reprieve is the one involving countries stuck with fixed currency regimes. Those assets are on a steady deterioration path. Investors owning stocks or credit depending on revenues from such countries should beware.

We are currently in a deflationary environment, where fixed currency regimes are, to put it mildly, a definite disadvantage for a country´s future prospects.





As always, good luck











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