Simulacro de incendio


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(Bloomberg) — U.S. stocks rallied, the S&P 500 Index headed for its first back-to-back gains of October. Strong earnings, which had largely been largely overshadowed in recent days, sparked gains; however, risks still remain with upcoming midterm elections to potential contentious trade talks with China.

Ahead, the U.S. jobs report is due Friday after ADP data surprised to the upside on Wednesday.

(Source: The Heisenberg Report)

Key Headlines:

  • Jordan says all-out trade war would have “drastic” effects on the global economy
  • Pence midterm schedule to focus on House, Governor races not the House: Axios
  • EIA inventory report shows crude build
  • General Electric downgraded to Baa1 by Moody’s, outlook stable

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The dollar added to a 16-month high while Mexico’s peso slumped over 2% after Fitch cut the country’s credit rating outlook to negative.


The EUR fell after inflation accelerated in October complicating the ECB’s decision process after the economy slowed to its weakest since 2014.

Sterling extended gains after a letter from U.K. Brexit secretary Dominic Raab was released saying a Brexit deal could be agreed by Nov. 21.

Turkey’s lira plunged and bonds fell after the government announced a wide range of tax cuts fueling inflation concerns.


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(Bloomberg) — The Bloomberg Grains Subindex heads for the third straight monthly drop, the longest slump this year, as the dollar rises to the highest since May 2017 against a basket of currencies, eroding the appeal of commodities priced in the greenback.

The subindex comprised of corn, wheat and soybeans has dropped 9.6% since the end of July.

The U.S.-China trade war drove the oilseed lower, and Russian wheat exports have overtaken U.S. shipments. 



Lifted by Drop in Havens After U.S. Data, Refunding The dollar extended modest gains after both 3Q ECI and ADP data for October beat estimates, while UST 10-year yields advanced after the Treasury refunding announcement China.

Soybean Futures Post Biggest Monthly Slump in a Year Escalating concerns on the spread of African swine fever erodes demand prospects for livestock feed The disease was reported at a new farm in Hunan province, according to the World Organization of Animal Health.

More than 100,000 hogs have been killed in various provinces to combat the outbreak in the world’s largest pig industry since the first case in August Russia  Signals Higher Wheat Exports After Ministry Meeting Russia indicated it’s comfortable with a higher level of wheat exports, a sign that curbs are less likely The Agriculture Ministry said it expects wheat exports of 33m tons to 34mm, topping estimates.


On Wednesday, soybean futures for January delivery rise 0.6% to $8.52 a bushel on the Chicago Board of Trade after touching $8.44 1/2, the contract’s lowest since Sept. 20.

Wheat futures for December delivery drop 0.9% to $4.95 1/4 a bushel The price heads for the third straight monthly decline, the longest slump this year. 

Market talk

“The path of least resistance has been lower as the dollar rallies and the trade war lingers,” Arlan Suderman , chief commodities economist for INTL FCStone in Kansas, City, Mo., says in a report

Other markets

Soybean-meal futures for December delivery rise 0.5% to $306.60 for 2,000 lbs after touching $302, the lowest since Sept. 18 Aggregate trading for this time rises 23% above the 100-day average, according to data compiled by Bloomberg.


(Bloomberg) — The dollar’s rally and rebounding equities took the shine off gold’s first monthly advance since March. The metal fell for a third day as the greenback touched a 17-month high. Stock markets extended a bounce back after plunging the past few weeks. Gold futures posted the best month since January after the equities sell-off spurred demand for the metal as a haven and investors boosted ETF holdings to a two- month high.


Holdings in exchange-traded funds backed by gold rose to 2,125 tons as of Tuesday, data compiled by Bloomberg showAssets are up 23.8 tons this month, snapping five months of declines.

The Bloomberg Dollar Spot Index +0.3% after hitting the highest since May 2017U.S. equities advanced on Wednesday and European stocks jumped, tracking a rebound across Asia


Gold futures for Dec. delivery -0.8% to settle at $1,215/oz at 1:32pm on Comex in N.Y.Touch lowest in almost three weeksPrice advances 1.6% this month

Market commentary

“Sentiment seems to have shifted once again toward risk-on, giving a lift to stock markets and putting pressure on bullion,” says Carlo Alberto De Casa, chief analyst at brokerage
ActivTradesThe dollar is the biggest headwind to bullion, Nick Holland, CEO of Gold Fields, says in Bloomberg TV interview on WednesdayGold has been “pulled down by relief rally and window dressing for stocks,” along with higher interest rates and a
stronger dollar, George Gero, a managing director at RBC Wealth Management, says in note to clients.

Other precious metals

Silver futures fall on Comex, post 4th monthly loss in 5.

Platinum futures rise on Nymex, post 2nd straight monthly increase.

Palladium futures climb on NymexMetal has monthly loss after reaching record on Oct. 23

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(Bloomberg) — Treasuries dipped into month-end settlement as long-end futures were heavily sold, steepening the curve; a large block trade in USZ8 contract shortly after 2pm New York time was influential, along with gains for stocks fueled by strong earnings and month-end rebalancing.

  • Yields rose 2bp-3bp across the curve; late sell-off at long end erased what remained of 5s30s flattening, pushing the spread back above 40bp
    • Wells Fargo this week estimated that as much as $21b of U.S. stocks could be bought and $27 of bonds sold for rebalancing after October performance gap
    • Bloomberg Barclays Treasury Index had a 0.22% loss on the month through Tuesday; declines fueled by strong economic data that pushed yields to YTD highs during the first half of the month were pared as U.S. equity benchmarks slid toward lowest levels of the year, stoking demand for bonds
  • S&P 500 was higher by more than 1.5% ahead of the cash equity close, led by megacap tech and auto companies after Facebook and GM reported results
  • Treasuries’ decline gathered pace during U.S. morning after strong October ADP employment; curve flattened amid real-money selling in 2-year and belly and large block buyer in ultra bond futures
  • In eurodollars, reds (Dec10-Sep20) out to greens (Dec20-Sep21) weakened by up to 5bp; EDZ8/EDZ9 spread steepened around 3bp, reaching as high as 46.5bp during U.S. morning
  • In eurodollar options, large downside position emerged across Mar19 puts via ~35k EDH9 97.125/97.00/96.875 1x3x2 put fly bought between 1.25 and 1.5 ticks; payout scenario includes Fed hiking rates in December and March meeting, with FRA/OIS around 30bp

(Bloomberg) — There are big changes coming to the TIPS program in 2019, but excitement over the news could not overcome the continued drop in commodity prices over the week, as TIPS underperformed nominals.

  • The U.S. Treasury said Wednesday that it will increase the amount of TIPS issued in 2019 by adding an October-maturing 5Y tenor. This will help fill in the large seasonality gap in the TIPS curve and hopefully will improve liquidity for the entire curve.
  • Real yields rose on the week in a fairly parallel manner. The additional notional in the 5-year part of the curve didn’t seem to cause it to underperform
  • Real Yield Change Carry Change Adjusted for Carry 5yr 1.06% 0.049% -0.001% 0.050% 10yr 1.08% 0.050% -0.001% 0.051% 30yr 1.29% 0.054% 0.000% 0.054%
  • TIPS trailed their nominal comparators during the week, with all breakevens tightening during the real yield selloff. The front end performed the worst as WTI oil fell more than 2% over the week
  • BEI BEI Change Carry Change Adjusted for Carry 5yr 1.91% -0.005% -0.005% -0.010% 10yr 2.07% -0.003% -0.003% -0.006% 30yr 2.10% 0.001% -0.001% -0.001%
  • Short-end real rates rallied on the week as soft equities had investors rethinking how quickly the FOMC will raise rates *T Today Last Week Change 1y1y Nominal 3.247% 3.205% 0.042% 1y1y Inflation 2.195% 2.093% 0.102% 1y1y Real 1.052% 1.112% -0.060%
  • Cash generally outperformed swaps and the basis between the two tightened Basis Chg 5yr 0.278% -0.004% 10yr 0.201% -0.011% 30yr 0.234% -0.006%


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(Bloomberg) — Only two high-grade borrowers came forward Wednesday to bring $2.4 billion of new supply across three tranches, in contrast to the 19 that priced during the first two trading sessions of the week. Issuers may be a bit gun-shy after Tuesday’s primary performance.

  • Daimler Finance North America is pricing $1.75b of 3Y fixed and floating rate notes
    • Parent Daimler AG last week reported 3Q revenue that beat analyst estimates and struck a more confident tone for 4Q after two profit warnings due to trade tensions and tighter emissions standards
  • Canadian National Railway initially came to market with two tranches but eventually dropped a 2Y tranche and opted to borrow the full $650m as a 30Y bond
    • The rail freight company’s 3Q earnings beat estimates and it approved a new buyback plan for as many as 5.5m shares
  • Today’s trades close out October at just under $86b of ex-SSA/EM volume, well short of the ~$110b market participants had estimated
  • Turning to the SSA space, Swedish Export Credit priced a $1b global bond today, while BNG Bank sold a $500m sustainability bond
    • Both deals announced with a no-grow target size
  • IG-rated EM issuers were also active with deals from Indonesia’s PT Pertamina ($750m), India’s REC Ltd ($700m) and Abu Dhabi’s Mubadala Development ($800m)
  • Duke Energy Carolinas is a candidate to kick off November corporate issuance as it wraps up investor outreach today for a possible green bond

ISSUANCE STATS Day   $2.400b WTD  $10.200b MTD  $85.875b YTD $981.759b *T DEALS

  • Daimler Finance North America LLC (DAIGR) A2/A, $1.75b across 2 tranches
    • $1.25b 3Y Fixed at +85; +85#, +100-105
    • $500m 3Y FRN at 3mL +67; L equiv
  • Canadian National Railway Co (CNRCN) A2/A
    • $650m 30Y at +105; +105#, +115 area
    • 2Y tranche dropped at guidance phase
    • Deal upsized from $600m



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

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