Shaken or STIRRED – 2021wk42

by K P
Reading Time: 15 minutes

This Week

  • Opinion piece: Shaken or STIRRED
    • US latest data & IR market
    • Canada, ahead of BoC meeting
    • Europe, ahead of IFO & ESI and ECB meeting
    • UK, ahead of the overpriced BoE hike
    • Emerging markets focus Russia, Turkey, Brazil
    • chartpack
    • RATES: US/European STIR/Long term, LIBORs, T-Notes, T-Bonds, Bunds, BUXLs, BTPs
    • CMDTY: Silver, Crude Oil, NatGas
    • STOCKS: VIX, SPX (incl seasonality & valuation), HSI, China A50, RSX, TUR, EWZ
    • Global cross assets performance heatmaps, Momentum/Trend/Exhaustion scores
  • “…one more thing…

@MacroTechnicals 2021wk42

* this is not a trade recommendation and for educational purpose only. please do your own research.

Opinion Piece

Shaken or STIRRED ?

Gonna watch the latest James Bond “No Time To Die” soon. But I meant STIR as in Short Term Interest Rates. When I go to Twatter platform it often comes across the timeline is just full of S&P500 day traders or perma BTFD guys. And as soon as the US stock market has YET AGAIN made new all-time-highs there are the high-fives and “see, told ya” memes. Stocks never ever go down anymore.

Meanwhile, there is so much going on in the “other” assets classes. Performances and volatilities.

Some central bankers have already embarked on their new hiking phase, while others are more delicate but slowly preparing the market. Or – since they are behind the curve – trying to catch up with the market.

It should be pretty obvious by now, there is no need for a FULL EMERGENCY monetary policy anymore. The world is trying to deal with the CV19-shutdown related aftermath of global supply-chain bottlenecks. But QE and interest rate policy wise, it’s really time to go back to NORMALISATION.

Front end rates in the US, Europe, UK and other laggers CAN ONLY GO UP from here at the moment (and should). US$ LIBOR, or £ LIBOR (or the SOFR/SONIA versions) are finally getting much more attention and momentum, great if you are engaged here via futures or puts.


While some regional stock indices (or bonds and FX) feel the pressure and are indeed SHAKEN, the global benchmark USA is NOT SHAKEN. New all time high. Bravo ! Nice come back !

I took a little more time for this blog to show extensive coverage regarding short term interest rates across some major regions and their positive or negative impact on other assets.

Otherwise, take a look at the dashboard.

Have a great weekend and good week ahead !



  • Housing Permits fell to 11months low (-8% M/M, +2% Y/Y)
  • Markit Manufacturing flash PMI touch softer but still strong 59.2 (est 60.3, Sep 60.7)
  • Markit Services flash PMI better than expected and strong 58.2 (est 55.1, Sep 54.9)
  • Philly Fed fell to 23.8 (est 25.0 , last 30.7) = after softer NY Empire State this drove the Regional avg to 11.
  • Next week
    • Monday Dallas Fed
    • Tuesday Richmond Fed
    • Thursday KC Fed, GDP Q3 
    • Friday PCE deflator, Personal income/spending, Chicago PMI, University of Michigan Consumer Confidence final

US$ STIR markets gets itchy

  • Short term interest rates really got big momentum in the last few days/weeks
  • With more inflationary data, unemployment rate dropping to 4.8%, hawkish tones from speakers, market set the tone for nose-diving:
  • 3M USD SOFR (secured) and LIBOR (unsecured) curves have been moving a lot especially since August and got just another momentum wave last week
  • Fed is more pro-active in their communication compared to other major central banks, but it still appears they are behind the curve (at least IMHO) as the US does not have an emergency case status anymore and the Fed keeps kicking the can down the road. Not just a first rate hike. Taper included. 
  • Market is pricing lift-off late next year, I personally would not rule out one earlier first step. 
  • It is quite interesting how aggressive for example 18M/24M LIBORs are being priced here. 
  • Unfortunately Eikon does not provide good historical data for longer than EDc15 (15th contract in the curve and continuous maturity), so I had to use the 15th which is currently Jun2024 instead of Dec2024.
  • Point is: spread differential to various 2Y rates are quite wide. The chart below is not a yield curve slope, these are pick up for very similar maturities (and/or credit risk premium too as LIBOR is unsecured). Meaning: if a professional rate fund assumes that 18M/24M LIBORs are being priced way too aggressive they would buy LIBOR futures and short 2Y Notes futures. 


Canada CPI

  • Headline CPI came in at +4.4% (est +4.3%, last +4.1%) = highest reading since 2003
  • Core CPI +3.7% after +3.5% = highest reading since 1990 !
  • Next week Wednesday BoC decision. 

BoC – more tightening next week 

  • With headline CPI +4.4%, Core +3.7% and unemployment back from 13.7% in May2020 to currently 6.9% Bank of Canada might announce the next round round of soft tightening, e.g. further tapering from C$ 2bln/wk to C$ 1bln/wk. 
  • Market is already pricing in more likelihood of first hikes soon. Or will BoC surprise with a hike now ahead of Fed ?
  • CAN$ 3M STIR term structure also “exploded” since August this year with rising inflation (latest +4.4%)
  • Curve looks quite aggressive here IMHO. 



  • Markit Manufacturing flash PMI: remains surprisingly strong at 58.2 (est 56.5, Sep 58.4)
  • Markit Services flash PMI fell to 52.4 (est 55.0, Sep 56.2)
  • Headline PPI reading at eye-watering +14.2% (est. +12.7%, last +12.0%) = highest since 1974
  • Next week: Monday IFO Sentiment


  • Markit Manufacturing flash PMI: remains surprisingly strong at 58.5 (est 57.0, Sep 58.6)
  • Markit Services flash PMI fell to 54.5 (est 55.5, Sep 56.4)
  • Headline CPI increased +3.4% as estimated after +3.0% previously 
  • Core CPI at +1.9% (est +1.9%, last +1.6%) = both readings highest since 2008
  • Bonds Shorts theme remains for the time being for “big4” (DE, FR, IT, ES).
  • Next week
    • Thursday ESI Business & Consumer confidence October surveys, ECB meeting
    • Friday Q3 GDP

ECB – next week non-event ?

  • perma dove Mdme Lagarde will point to economic risk to the downside, supply-chain issues, inflation concern but “transitory”. Bothered. 
  • But woah, even the almighty EURIBOR curve has signs of life, who knew ?
  • While EURIBOR futs drifted lower like nearly all major STIR markets, it’s correlation modelled. I really doubt if ECB will actually raise rates ever. 
  • Slowly drifting into mini bear-steepening STIR structure, but miles from realistic hiking phase.

UK – mixed, but BoE hike around the corner

  • Markit Manufacturing flash PMI strong, 57.7 (est 55.8, Sep 57.1)
  • Markit Services flash PMI strong 58.0 (est 54.5, last 55.4)
  • CBI Industrial Trend Orders weaker 9 (est 18, last 22, 6mths low)
  • GfK Consumer Confidence weak -17 (est -16, last -13)
  • Retail Sales weaker -1.3% Y/Y (est -0.4%, last -0.2%)
  • Core Retail Sales weaker -2.6% (est -1.7%, last -0.9%)
  • Headline CPI lower than exp +3.1% (est +3.2, last +3.2%)
  • Core CPI +2.9% (est +3.0%, last +3.1%)
  • RPI +4.9% (est +4.7%, last +4.8%)
  • PPI Input +11.4% after +11.2%, Output +6.7% after +6.0%
  • oh-oh, new confirmed CV19 cases are rising again sharply.
  • Vaccination progress of total population: one dose 73%, second dose 67%
  • Hospitalisations and fatalities so far stable. Hopefully this will not result in yet another more restrictions or regional lockdowns. 

BoE finally turns hawkish, market goes nuts

  • A few weeks ago I included the “BoE behind the curve”-chart in a blog and also tweeted about it. 
  • Inflation has been risen sharply, energy crisis, and STIR & Bond markets screaming : “hey, look at us !”
  • Since THAT chart, 2Y moved from 0.533 to 0.663 (another +13bp) and 10Y from 1.161 to 1.145 (-1.5bp) = short end is catching up to the long end.
  • So, being short Gilts, but more so short LIBOR futs (or via puts) was the appropriate strategy.
  • The final trigger came after Governor Bailey’s comment “Monetary policy cannot solve supply-side problems – but it WILL have to act and MUST DO so if we see a risk, particularly to medium-term inflation and …expectations”.
  • I mean, what’s new ? That’s always the case. Anyway, Monday market players and algos quite overreacted as if BoE will hike 25bp ASAP , which really seemed a bit aggressive.
  • Oct contract literally tanked just before expiration ( bit silly tbh )
  • Dec contract sold off 25bp (!) Monday initially, but recovered a good chunk of it until Friday close. 99.5 puts traded 0.16 intraday on Monday, closed 0.12 and fell back to 0.07. 
  • Here are two snapshots from 3M £ SONIA and £ LIBOR curves
  • See how the curves 2022 expirations bulged up since August
  • Now though the market seems to be way too aggressive pricing in a few rate hikes over the next 12months:


RUSSIA – catching UP ! 

  • Central Bank hiked for the 6th time, surprisingly aggressive +75bp to 7.50%
  • CB governor said even considered +100bp this week
  • Said “we may consider raising rate again by +100bp”
  • Forecasts:
    • CB rate 7.3%-8.3% range in 2022
    • GDP 4.0-4.5% 2021
    • CPI 4.0-4.5% 2022
  • Market close this week:
    • RUB +1.2% vs USD (+5.6% YTD)
    • 2Y +42bp (+340bp YTD), 10Y +40bp (+190bp YTD)
    • IRTS -0.7% (+35% YTD), RSX ETF +0.1% (+35% YTD)

TURKEY – predictable unpredictable !

  • What an absolute mess !
  • In March 2021 CB hiked +200bp to 19%, President Erdogan fires the CB governor for being too hawkish.
  • In Sep 2021 the CB cut -100bp back to18% despite soaring inflation, Erdogan promptly fires three CB board members
  • And this week a duper dovish CB cut astonishingly another -200bp to 16%.  
  • Lira fell to record low 9.66
  • Market close this week:
    • TRY -3.5% vs USD (-23% YTD)
    • 10Y +33bp (+690bp YTD)
    • BIST +5% (+0.2 YTD), TUR ETF +1.1% (-22% YTD)
  • S&P rating agency “despite recent improvements still views BoP weak while Monetary policy is UNPREDICTABLE“, affirmed foreign and local currency, outlook stable.
  • Fitch said “rate cut was another ‘policy misstep’, watching how much this will hurt financing for banks and companies, sees inflation upside risks to 17.2% year-end”. (French, Spanish and Italian banks have large exposure in Turkey).
  • Saturday, Erdogan declared 10 western ambassadors “persona non grata”. 

BRAZIL – running away ! 

  • Mentioned this a few blogs ago, Brazilian markets remain under pressure
  • Inflation is not getting under control, latest reading +10.25%
  • Fiscal challenges and govt is looking to breach its spending cap to boost welfare spending
  • Central bank is intervening in the FX market and selling US$
  • Money fleeing the country
  • Market this week:
    • BRL -3.3% vs USD (-8% YTD)
    • 2Y +135bp (+685bp YTD), 10Y +108bp (+524bp YTD)
    • Bovespa -7.3% (-11% YTD), EWZ ETF -9.6% (-19% YTD)
  • Market expects Central Bank to raise for the 6th time, +100bp to 7.25%



  • STIR: extensively shown above in the macro section, there is a lot going on right now in the short term interest rates market. While some central banks have started their new hiking phase already, others are just around the corner and preparing what the market has been telling them for a while. It’s time to move on from emergency CV19 as inflation is way above targets and so far not transitory. £ LIBOR and $ LIBOR are prime examples where the market has been anticipating moves, but needed some form of confirmation trigger. Even though some parts of these term structures look too aggressive. Huge trades recently. 
  • US2Y absolutely on a string, 25bp since Sep and with a huge spread differentials to $ LIBOR implied yields now.
  • US5Y also further momentum and yields now doubled since Jul/Aug lows
  • US10Y making new highs in this upmove since Jul/Aug lows and is facing 1.70/1.80 “resistance” 
  • US30Y is currently in a 2.00-2.20 range, creating not a one-way street like short maturities, but wild/wide futures swings. Dec contract sold off from 194, found again support around 188 level and rallied back strongly. 1 big figure = $1,000 per contract 
  • 2s5s are back to 74bp last seen in April this year. 2s10s kind of range bound 110-130bp, 5s30s retreated back to 87bp, lowest spread since May. Partly supportive for financial sector with rising yields/bear steepening, ultralong end sticky and actually flattening supportive for growth/tech sector. See yield curve charts on the dashboard.


  • Off to the races… even 5Y yields in core Europe can’t be stopped, not by ECB PEPP, not by the market. 
  • Short Europeans Bond Futures theme is still intact, but had certainly already quite a wave.
  • Ultra long end BUXLs though found interest near 0.40% recently and rallied back to 0.22%. No engagement for me at the moment. 
  • IT BTPs getting more sticky coming close to 1% yields. 1.10/1.20% is the key zone on the big picture. Let’s see what ECB (and verbal Draghi interventions) will do then. Since June BTPBUND spread is range bound 100-110bp. Watch that !
  • UK rates are absolutely flying off. 


  • Investment grade default protection didn’t move much this week, High Yield & EM though slightly wider.


  • DXY basket struggled to move above 94.50/95 resistance zone, saw a reversal into 93.50 support. 
  • EURUSD broke initially the 1.1650-1.1680 support zone, fell to 1.1538 and bounced straight back. With a pretty obvious ECB/Fed monetary divergence building up and Germany’s export troubles, I don’t see a good reason to be structurally long. Economic surprise index is deep negative, but inflation surprise index high = stagflation fear
  • Cable broke 1.36 support and fell to as low as 1.34 recently, but short cover rebound rally and BoE hike hopes got some extra short term momentum. Yield spreads certainly got a big boost in the last few weeks, but they were also volatile between 10-35bp. Still not my preferred FX pair to be engaged with. 
  • Commodity driven currencies certainly got their mojo back recently:
  • AUD trading much higher due to that, but it seems also the China contagion risk has been completely shrugged off. 
  • AUDJPY as the classic RiskOn/Off pair has made a huge comeback rally, driven by energy commodity export/import divergence and got now rejected at 85.50/96 resistance zone. This pair rallied +11% off Aug lows. Impressive.
  • CADJPY similar nature: energy driven Can$, BoC tapering and on their way to raise rates, Canada economic surprise index +54 vs Japan -56, Canada CPI +4.4% vs Japan +0.2%, yield spreads widening since Aug/Sep all contributing to the rebound rally from 85 to 93 or +10%. This week bit of profit taking after being overbought. 

Emerging Markets:

  • USDRUB, USDTRY and USDBRL as explained above in the macro section. 
  • Ruble gaining as Russia clearly has the upper hand regarding NatGas exports to Europe plus Brent rallying strongly
  • Turkish Lira out of control and in uncertainty limbo, capital is fleeing (though USDTRY looks overbought)
  • Brazil Real keeps weakening as the country has not been able to get the sheer stunning inflation in control 


  • Hi-HO Silver. Best commodity performer this week. Recent bear trap was … a bear trap and got me too. Strong rebound in the last 3 weeks, technical long trigger 23.50. Weaker US$ (on inverted right scale) certainly was supportive during last week as well.
  • Crude Oil chopping between $81/$84 this week but closed the week positive on a high note. Technically overbought after the monster +37% rally, backwardation currently supportive (being long front end and roll into next month creates positive roll carry). WTI closed +2.5% this week, Brent Crude +0.6%. What will OPEC+ do when oil hits $100 ? Pump more
  • US NatGas continues the choppy retracement of the previous parabolic rally. 
  • EU and UK NatGas continue to “cool off” after the crazy rally/short squeeze earlier. 


  • US (global benchmark) volatility has shrugged off all concerns yet again… China, Evergrande, debt ceiling (kicked the can down the road until Dec), Energy crisis, inflation, rising rates, taper talk, meteors, aliens. 
  • VIX spot “crashed” all the way back to 15. Well, obviously you can’t buy “cheap VIX” here, Nov futs are currently at 19-handle. Huge contango curve, creating negative roll yield if you are long, but also shows higher uncertainty term future while nearby “calm down and carry on” mood. So, what will be the trigger for a escalation spot from here to mid 20s ?
  • SPX has a positive historical seasonality, true. And I saw people overlaying 30yrs seasonality in % return axis left and SPX price chart axis on the right, assuming SPX will now go to 4800 because of that. Can a “Santa Rally” bring the index there ? Sure. Everything is possible. We also saw GME trading at $480 or $24bln mkt cap and we also saw WTI Crude Oil trading at negative -40$ last year. But What makes me a little cautious here, SPX is already way above seasonal average return. And it’s already trading at x21 multiples. Let’s say earnings will settle at $215 which gives x20 = 4300 or x22 = 4730. Next target x23 then 4945 ? BY END OF THIS YEAR ? hmm
  • Banks/Financials KBE and XLF ETFs outperformed yet again the SPY benchmark this week, so did URA and XOP ETFs.
  • NEXT WEEK BIG EARNING REPORTS... FAAMG basket ! Facebook, Google, Microsoft, Twitter, Ebay, Ford, Boeing, McDonalds, Apple, Amazon and Cameco CCJ (=> URA ETF). Could bring some volatility back into tech-skewed SPX/SPY and of course Nasdaq.
  • China’s huge real estate and growth problem … or is it ? Evergrande has indeed paid the coupon on the outstanding US$ bond. Of course they only can do so while trying to sell assets. So, this is a dead man walking. Total restructuring going forward. Bond holders may be happy to get the coupons paid within “grace period”, but their concerns really are to get their total investment back, e.g. Q1 2022 when some big issues maturing. So, it’s “TICK TOCK”. However, the overall market seems to be ok with the strategy of China not imploding, hence VIX back to 15, US stocks back to ATH.. .and HK or China major stock indices +11% off recent low with brave bottom pickers. 
  • Russia, Turkey and Brazil already mentioned above in the macro section, but here are the charts.


performance snapshot wk42

weekly performance snapshot wk42

monthly performance snapshot wk42

outright Momentum/Trend/Exhaustion snapshot wk42

spread/ratio Momentum/Trend/Exhaustion snapshot wk42

STIR snapshot wk42

…oh, One More Thing…

ICYMI – this made me laugh:

*  as always, please check the DashBoard for the bigger Macro picture and connect the dots

Das war’s , thanks for reading, vielen Dank und good luck, Kai


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