Albert Edwards Spots The “Peak Bullshit” Indicator

Thursday, May 3, 2018
By Paul Martin

by Tyler Durden
ZeroHedge.com
Thu, 05/03/2018

In his latest note, SocGen’s Albert Edwards turns away from the big macro trends to look at two more pressing, market-driven phenomena, namely the ongoing surge in the US Dollar – or rather what’s behind it – and the threat of an imminent drop in Treasurys yields as the “global recovery” narrative ends with a bang, and then synthesizes it all by laying out his colorful description of last week’s WeWork junk bond travesty.

Edwards begins by echoing virtually every single sellside desk in recent weeks, by remarking that “the dollar’s surge is occupying investor attentions” and adds that after more than a year of ignoring widening interest rate differentials that favoured the dollar, “the market has reengaged.”

Addressing rate differentials, Edwards picks up where his FX strategist colleague Kit Juckes leaves off every morning – and for much of the past year in sheer frustration – and notes that while for the first nine months of 2017, 2y interest rate differentials were becalmed and removed as a currency driver, “only in the final quarter of 2017 did the US 2y upward march resume, triggering a brief dollar rally (which aborted), but has now resumed in earnest.”

One of the key features of this rise has been the explicitly stated resolution of the Fed to stick to its tightening schedule, irrespective of the weakness in equity prices. For much of this tightening cycle, the 2y rate has been anchored close to the Fed Funds rate due to the market’s lack of conviction that the Fed would fulfill its tightening promises as represented in its dot chart.”

The Rest…HERE

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