Risk markets stabilize while oil price drops📉
Risk-markets have since seen a bit of a reprieve since, with ADP reporting much weaker payrolls growth in September (+89k vs +158k expected), retail sales data across Europe (-1.2% MoM vs -0.5% MoM expected), Citi credit card data out of the US (-1.3% MoM in 1st two weeks of September), and a 12% sell-off in oil futures putting a temporary halt to the bond sell-off. However, unlike the Fed-driven (policy tightening) sell-off over the past 24 months, the current yield move is driven via a bear-steepening, with the 2/10s curve dis-inverting back levels not seen in over a year. Despite the Fed nearing the end of their hiking campaign, investors are now simply demanding higher yield premiums and discount rates as we appear to be normalizing 15 years of ZIRP/QE excess in a hurry, especially with inflation pressures looking to stay in the long-run.
