~*~Mining and Metals Du Jour~*~

[srm4u]

looks like we have 2 dates to look forward too....12/11...12/19

The Yield Curve Just Inverted--Sort Of--And That Is A Sell Signal For Stocks

The real problem is that long-term yields stubbornly refuse to rise, or "back up" in bond trader parlance. Observers, especially the bullish ones, will throw out a million different reasons why this happening, but they almost always miss the big one: the Fed.

According to its website the New York Fed owned a staggering $2.1 trillion of Treasury notes as of last Wednesday in its System Open Market Account (SOMA). Treasuries compose the largest portion of the NY Fed’s $3.9 trillion holding of long-term securities, which also includes $1.7 trillion in agency mortgage-backed securities. The SOMA account balance is below its peak levels of about $4.5 trillion as the Fed has stopped using new money to buy Treasuries. That said, as shown in this statement, the Fed continues to use rollover process of maturing bonds over a certain threshold of proceeds ($30 billion for Treasuries and $20 billion for MBS) to re-invest in other Treasury note series. The Fed has curtailed its buying but has not yet sold a single dollar’s worth of the SOMA holdings it acquired in its quantitative easing (QE, QE2, etc.) operations.

So, there are more than $2 trillion of U.S. Treasury notes that are not circulating and are held by an entity that has a policy of not selling them. That's a huge externality in the market and is a major factor keeping long-term interest rates lower, as the Fed has a bias toward holding longer-dated bonds.

The Fed is artificially suppressing long term interest rates at the same time that short-term interest rates are being raised by, yes, you guessed it, The Fed.


FILE - In a Thursday, Nov. 29, 2018 file photo, Federal Reserve Chairman Jerome Powell addresses the Federal Reserve Board's 15th annual College Fed Challenge Finals in Washington. Powell said Monday, Dec. 3, 2018 that Powell says that despite solid economic progress, the country still faces a number of challenges including slow wage-growth for lower-income workers to sluggish productivity and an aging population. (AP Photo/Cliff Owen, File)ASSOCIATED PRESS

So, that's the conundrum facing Jerome Powell and the Federal Open Market Committee. The market is pricing in rate hike at the next FOMC meeting on Dec. 18th-19th--the CME’s FedWatch tool shows an 83.5% chance for that outcome in this morning’s trading. With only 13 basis points separating the 2-10 year Treasuries today, though, such a rate increase would, other things equal, throw the yield curve into inversion.

Will Powell and co. risk a yield curve inversion? I think the FOMC has painted itself into a corner, and has to raise in mid-December. Powell’s dovish speech at the New York Economic Club ignited last week's stock market rally, but if he and his colleagues don’t throw the market one more rate hike participants will wonder if the FOMC knows something about the economy that they don't.

At the end of the day, I don't want to own stocks in that environment. What is intellectually tidy about all this this is that the very force that has pressured the stock market since its highs in September--the rising yield on the 2-year Treasury note--now offers--with a 2.83% yield--a clear alternative to the paltry 1.9% yield offered by the S&P 500.

So, don't fight the tape and don't ever fight the Fed. Lighten up on stocks and increase your short-term bond holdings here. It's an easy to way to protect your portfolio.
https://www.forbes.com/sites/jimcollins/2018/12/04/the-yield-curve-just-inverted-sort-of-and-that-is-a-sell-signal-for-stocks/#1104303e3eaa

Take Five: Powell, payrolls, oil production - World markets themes for the week ahead

The odds look stacked against British Prime Minister Theresa May getting parliament’s nod on Dec. 11 for her draft Brexit agreement; members of her own Conservative Party, the opposition and the Northern Irish party which props up May’s minority government all oppose it.
How will markets react? Anyone’s guess. If a no from parliament is interpreted as a slide towards no-deal, the pound may tumble. But if a second referendum — and a remain outcome — becomes a possibility, the opposite is likely.
https://www.reuters.com/article/us-global-markets-themes/take-five-powell-payrolls-oil-production-world-markets-themes-for-the-week-ahead-idUSKCN1NZ1O4?feedType=RSS&feedName=businessNews&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+reuters%2FbusinessNews+%28Business+News%29&utm_content=Yahoo+Search+Results
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=145255953