No vendas la piel del oso antes de cazarlo.



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(Bloomberg) — Early gloom and doom around stocks following misses by Amazon and Google dissipates somewhat by the afternoon, as investors nibble on the hardest hit parts of the equity space: small- and mid-cap stocks, semiconductors and home builders. Comments from a Japanese official about an unscheduled meeting to discuss the country’s depressed stock market may also be buoying trader spirits.

The VIX index was limp even when stocks were at their worst early on; some analysts see a disconnect between plunging stocks and a tame VIX rally lately.

Treasuries are trading in the middle of their daily range, propelled higher by the selloff in stocks. The 10-year briefly cut through 3.06%, but that proved to be too much as equities found their footing just as that level was being reached.

Bond rally may also have hit a wall given the inflation measures in the 3Q GDP report, while tame, are not expected to stop the Fed from raising rates again in December.

After a monster week, the greenback’s rally petered out, topping just shy of 1204 for the Bloomberg Dollar Spot index.

JPY was the standout performer versus the dollar, strengthening to 111.38 before paring.

Gold makes a round trip too. The haven bid that took it up by 1.1% was faded to a gain of 0.3% in afternoon trading.

Key Headlines:

  • Trump Says China Wants to Make Deal Badly, Not Ready Yet
  • Asakawa: BOJ, MOF, FSA held unscheduled meeting to discuss stocks
    • NOTE: Japan’s Nikkei 225 index down 9.3% month to date, heads for worst monthly drop since March 2011
  • EU, Italy Working Toward Budget Solution: Juncker to Spiegel
  • Coeure: Central Banks Must Follow Domestic Mandate in Policies
  • IMF Board Approves Increase of Argentina Loan to $56.3 Billion
  • Business-Spending Slowdown Casts Shadow on Solid U.S. GDP Report


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Treasuries Rally, Curve Steepens, Amid Tech-Led Equity Sell-Off

(Bloomberg) — Treasuries advanced Friday, extending weekly gains, as U.S. equities continued their month-long slide led by technology shares. Yields closely tracked stock benchmarks, reaching intraday lows during U.S. morning followed by partial rebound.

  • Yields were lower by as much as 5bp in 5-year sector shortly after 3pm New York time, steepening 5s30s curve by 2.4bp; 10- year yields were lower by 3.6bp at ~3.08% vs session low 3.055%, lowest since Oct. 3
    • 10-year yield declined more than 11bp on the week, most of the move occurring Wednesday as the S&P 500 fell 3.1% to lowest level since May.
  • Most of Friday’s gains followed a weak cash open for equities after Amazon and Alphabet results were released Thursday after the close; eurodollar strip aggressively bull flattened as expectations for Fed rate hikes fell sharply across 2019 tenors
    • By mid-afternoon, dollar OIS implied Fed terminal rate peaking at ~2.77% by December 2019, down from ~2.93% at Monday’s close
    • EDZ8/EDZ9 spread dropped as low as 38bp, tightest since Sept. 7, as rate-hike premium eroded
  • Futures volumes were robust with TY contract reaching 130% of 10-day average, TU 170%; in eurodollars EDZ9 was most active with ~650k contracts changing hands, about double the average

(Bloomberg) — Violent swings in risk assets kept potential issuers on the sidelines and the few that elected to move forward this week priced smaller deals.

  • IG weekly primary supply totaled just $5.975b, the lowest volume since the summer when the last week of August yielded just $2b
  • Treasury yields sank as traders sought out haven assets. The 10y yield is at 3.08%, down 11bps from this time last week
  • Credit spreads widened in kind. The Bloomberg Barclays IG OAS index is at the starkest divergence from Treasury yields since mid-June, closing last night at +116
  • Weekly estimates are largely calling for $15-$20b, with upside potential for $30b should the market find some stable footing
  • Early calls for November supply are $85-90b
  • Despite all this, investment-grade new issue performance was solid
    • Issuers paid less than 2bps to price deals, and orderbook oversubscription rates and spread compressions were largely in line with 2018 averages
      • Recent new issues have traded inside pricing levels
        • Constellation Brands, Kimberly Clark, SunTrust are all trading inside pricing levels
  • That’s not to say there aren’t some concerning signs emerging
    • Lipper Fund flows data show IG mutual funds posted meager inflows of just over $500m this week; this follows two weeks of rarely seen fund outflows for corporate investment-grade funds
      • IG total returns continue to lag most asset classes with the YTD return -3.39%
        • Generally, bonds with long maturities and low coupons have the longest durations. These bonds are more sensitive to a change in market interest rates and thus are more volatile in a changing rate environment
      • Anheuser-Busch InBev bonds widened as much as 10bps Wednesday after the beer bellwether announced it will cut its dividend in half


  • The Constellation Brands $2.15b bond sale is the second M&A-related deal in the consumer space in as many weeks after Conagra Brands brought $7.025b for the Pinnacle Foods acquisition
    • Tranche concessions were largely negative driven by a ~$12b orderbook
    • Included 3NC1 FRN tranche, which mimics the flex provisions borrowers have in their credit facilities
  • SunTrust Bank brought the week’s largest financial issue, pricing $1.4b across three tranches and paying ~3bps in new issue concession
    • It was the third regional bank to price this week, following KeyCorp’s $500m 7y deal out of the holding company Monday and Citizens Financial Group’s $300m perpetual preferred sale
    • It joined a recent wave of domestic regional banks accessing the 7y part of the curve. These institutions may be locking in longer- term funding, extending out to a 7y from a 5y, for just a marginal increase in cost given the flatter nature of the belly of the curve
  • Kimberly Clark printed a $500m no-grow 10y, pricing inside fair value after building an orderbook 3.4 times covered
  • Two utilities, National Rural Utilities Cooperative Finance and Oglethorpe Power, both successfully upsized their deals from original targets


  • Weekly volume $5.975b vs $17.825b last week
  • MTD volume $75.675b
  • September volume $122.900b
  • YTD volume $971.559b


Day         Volume

Monday     $2.950b

Tuesday       None

Wednesday    $3.025b

Thursday       None

Friday           None


  • Constellation Grows $12b Book for Cannabis Deal
  • Issuers Brave Stock Slump, Concessions are Muted




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GRAINS WRAP EUROPE: Wheat Jumps Amid Egypt Tender, Russia Talks

Image result for Anatoly Medetsky

By Anatoly Medetsky

(Bloomberg) — Wheat rallies most in two months as Egypt considers buying U.S. wheat at its tender. U.S. wheat was the lowest offer excluding freight.
Russia’s Agriculture Minister held a meeting with exporters, raising the agency’s forecast for shipments, but saying supplies for the domestic market were still a priority.
Australia worsened the outlook for its crops after a dry September.
Market Movers           
Wheat for Dec. up as much as 4% to $5.06 3/4
Biggest intraday gain since Aug. 29
Milling wheat in Paris +1.6% to EU202.50/ton
“U.S. exporters need to become more competitive in order to bring down stocks,” Ole Hansen, head of commodity strategy at Saxo Bank A/S, said before the list of best offers in Egypt was published
Latest News
Chicago Wheat Jumps as Door Opens for U.S. to Sell to Egypt
There was speculation that U.S. might get a chance to sell to Egypt for the first time since the 2016-17 season
Russia Signals Higher Wheat Exports After Ministry Meeting
That may be a sign that export curbs are less likely
Egypt Is Said to Get Wheat Offers From 14 Companies
Australia Crop Forecast Revised Down in ABARES Drought Report
Winter crop forecast for 2018–19 revised down to 33.2 million tonnes due to lower-than-expected rainfall in Sept

Ukraine 2018-19 Corn Crop Est. Boosted to 35m Tons: Grain Group
Estimate for 2018-19 season raised from 30m tons based on harvest progress, head of Ukrainian Grain Association Mykola Horbachov said

U.S. CROP EXPORTS: 260,000 Tons of Soybeans to Unknown Buyers
Of the total, 200,000 tons are for delivery by Aug. 31, and 60,000 tons are for delivery in the 12 months that start Sept. 1, the USDA says Friday in a statement
Crop Weather
LATAM CROP WEATHER: Brazil Ports May Face Rough Sea Conditions


Wheat Futures Jump on U.S. Offer to Egypt as Russia Turns Inward
U.S. wheat was lowest FOB offer in Egypt’s tender, traders say
Russia said domestic market holds priority for grain supplies


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(Bloomberg) — Traders have been waiting all season for the moment U.S. wheat becomes more competitive than Russian supplies. Today’s Egypt tender was a first step in reaching that inflection point.
While U.S. grain was the lowest free-on-board offer in the tender for delivery Dec. 11-20 by state-run buyer GASC, higher freight rates kept American grain out of the list of best offers, said traders involved in the process. Still, it was a sign that U.S. supplies are gaining ground just as Russia said its domestic market will hold priority when it comes to grain supplies.
Global wheat traders closely watch Egypt as its public tenders offer a glimpse into how competitive various countries are in the world market. Russia, the biggest global shipper, has dominated Egyptian tenders in the past few years. This season, the grain powerhouse is harvesting a smaller, drought-hit crop, fueling speculation that U.S. exports will pick up.

“U.S. exporters need to become more competitive in order to bring down stocks,” Ole Hansen, head of commodity strategy at Saxo Bank A/S, said before the list of best offers was published. “Today’s GASC offer could indicate that the recent drop below $5 a bushel could be what is needed in order to see a pickup in oversea demand.”

As Global Wheat Crops Fry, U.S. Exports Become More Appetizing Wheat prices have been on the rise this year, partly on speculation top shipper Russia will restrict wheat exports, opening doors for U.S. supplies. Russia said it’s necessary to give priority to supplying grains to domestic producers of flour, bread, pasta and animal feed and that Agriculture Minister Dmitry Patrushev was discussing exporters’ plans for the current season. Patrushev was meeting exporters today.







-R.W.N II, yours in 322.

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