Read our market review and find out all about our theme of the week in MyStratWeekly and its podcast with our experts Stéphane Déo, Axel Botte, Aline Goupil-Raguénès and Zouhoure Bousbih.
Summary
Topic of the week: Risks associated with reduced liquidity in the US Treasury bond market
- Liquidity in the US Treasury market fell in 2022 to return to lows since March 2020;
- The increase in volatility, linked to uncertainty about the Fed's monetary policy, and structural reasons are at the root of this;
- The growing presence of hedge funds and high-frequency trading firms makes the Treasury market vulnerable in times of stress, such as March 2020 when the Fed was forced to step in;
- Necessary reforms are under discussion but very few have been taken, to prevent the market from amplifying shocks instead of absorbing them, which constitutes a threat to global financial stability.
Market review: Mean-reversion
- Risky assets up in limited volumes;
- Rebalancing of portfolios and short covering;
- Yield curve inversion persists;
- Central banks have not said their last word.
Stéphane Déo's podcast
- Is the rally in the markets excessive?
Chart of the week
Interesting detail in manufacturing PMI last week. The input price component slowed down very quickly (64.4 when we were at 90, 12 months earlier) while the output price component held up better (63.7 against 76 months ago).
This means that we are beginning to see a decrease in inflationary pressures.
This is positive for business margins, the cost structure is deteriorating less quickly while sales price increases are still sustained.
Figure of the week
German consumption rose by 1.0% in the third quarter. A very resilient figure that shows that supportive policies are effective.
