- 2-year US Treasury yield highest since March 10th. Curve inversion deepens between 10-2 years (pages 2-4)
- No inflation risk priced into break-evens (page 5)
- Real yields holding above 1.50% across the curve. 5-year real yields have risen to 1.79% (pages 7-8, 10). Budget deficit is widening sharply. The CBO estimates the Federal budget deficit hit $1.2 trillion in the first eight months of fiscal year 2023. The 12-month moving total for the deficit likely surpassed $2 trillion in May
- Leveraged loans, private credit had a very strong week, despite elevated real yields. The OFR’s financial stress index continues to improve too: credit spreads are narrowing, with reduced volatility (pages 14-15)
- S&P 500 entered a new, technical bull market last week, up 20.2% since the low of October 12th 2022 (pages 42-52)
- Strong wage data pushed the 2-year Gilt yield to a new post mini-budget high last week, before edging down a touch. GBP has also broken out on a trade-weighted basis (pages 19, 30)
- Pre-emptive hikes from BoC and RBA boost CAD, AUD (page 32)
- The renminbi is sliding, as China data continues to disappoint. Concerns over China continue to weigh on oil prices, despite OPEC+ production cuts. WTI crude oil falling again this morning, below $70/barrel. CGBs continues to rally after weak Chinese inflation data last week (pages 29, 31, 53-55)
- By contrast, the won is climbing (page 31)
- Yen holding a touch below 140. Services swung back into surplus in April, pushing the current account surplus up to Y1.900tr. Strong services data, including for recreation, lodging & hotels, and restaurants could push yen higher (page 29)
- TOPIX closed at a new secular high this morning, up 18.3% YTD in yen terms and 12.0% YTD in US$ terms (matching the S&P 500 YTD gain) (page 40)
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