acemaxx<p>When “the spread = SOFR swap rate – 10y UST yield turns” negative:</p><p>US Treasuries sell-off: From Safe-Haven to Lost-Haven?</p><p>Banks and How US Treasuries Take up Space & Capital</p><p><a href="https://acemaxxanalytics.substack.com/p/ust-sell-off-from-safe-haven-to-lost" target="_blank" rel="nofollow noopener noreferrer" translate="no"><span class="invisible">https://</span><span class="ellipsis">acemaxxanalytics.substack.com/</span><span class="invisible">p/ust-sell-off-from-safe-haven-to-lost</span></a></p>
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acemaxx@acemaxxanalytics@econtwitter.net
macro economics and charts - alumni Uni St. Gallen, Switzerland, Zurich
- Joined
- Dec 11, 2022
acemaxx<p>Foreign investors in US assets are clearly spooked by Washington's <a href="https://econtwitter.net/tags/trade" class="mention hashtag" rel="tag">#<span>trade</span></a> war and concerned about radical shifts in US policymaking, alliances and Govt institutions, chart @reutersmiked.bluesky.social <a href="https://www.reuters.com/markets/us/global-markets-view-usa-2025-04-11/" target="_blank" rel="nofollow noopener noreferrer" translate="no"><span class="invisible">https://www.</span><span class="ellipsis">reuters.com/markets/us/global-</span><span class="invisible">markets-view-usa-2025-04-11/</span></a></p>
acemaxx<p>(Wow!)<br />John Williams @NewYorkFed Trump’s <a href="https://econtwitter.net/tags/tariffs" class="mention hashtag" rel="tag">#<span>tariffs</span></a> will send US <a href="https://econtwitter.net/tags/inflation" class="mention hashtag" rel="tag">#<span>inflation</span></a> soaring to as high as 4% this year, push <a href="https://econtwitter.net/tags/unemployment" class="mention hashtag" rel="tag">#<span>unemployment</span></a> higher and hit economic growth – chart @FT <a href="https://www.ft.com/content/05fa8ad1-4810-4c4f-b120-999e1275eeae" target="_blank" rel="nofollow noopener noreferrer" translate="no"><span class="invisible">https://www.</span><span class="ellipsis">ft.com/content/05fa8ad1-4810-4</span><span class="invisible">c4f-b120-999e1275eeae</span></a>?</p>
acemaxx<p>And:<br />(EUR) 30y Greece Govt bond yield: 4.228% < (USD) 10y UST yield: 4.837%</p>
acemaxx<p>(EUR) 10y <a href="https://econtwitter.net/tags/Greece" class="mention hashtag" rel="tag">#<span>Greece</span></a> Govt bond yield: 3.49% < (USD) 10y UST yield: 4.43% - chart @highcharts.com</p>
acemaxx<p><a href="https://econtwitter.net/tags/German" class="mention hashtag" rel="tag">#<span>German</span></a> economy won’t see meaningful growth this year and Trump’s <a href="https://econtwitter.net/tags/tariff" class="mention hashtag" rel="tag">#<span>tariff</span></a> policies threaten an even bleaker outcome. GDP will only increase 0.1% in 2025 following 2y of <a href="https://econtwitter.net/tags/contraction" class="mention hashtag" rel="tag">#<span>contraction</span></a>, less than the 0.8% predicted in Sept, chart @economics <br /><a href="https://www.bloomberg.com/news/articles/2025-04-10/german-institutes-slash-2025-outlook-and-warn-of-tariff-pain" target="_blank" rel="nofollow noopener noreferrer" translate="no"><span class="invisible">https://www.</span><span class="ellipsis">bloomberg.com/news/articles/20</span><span class="invisible">25-04-10/german-institutes-slash-2025-outlook-and-warn-of-tariff-pain</span></a></p>
acemaxx<p>Talking about zero tariffs without mentioning <a href="https://econtwitter.net/tags/German" class="mention hashtag" rel="tag">#<span>German</span></a> CA-surplus is idiotic -- In a <a href="https://econtwitter.net/tags/tariff" class="mention hashtag" rel="tag">#<span>tariff</span></a> escalation, the deficit country (i.e. the US) always wins. The country with the largest surplus, namely <a href="https://econtwitter.net/tags/Germany" class="mention hashtag" rel="tag">#<span>Germany</span></a>, will certainly lose, chart Heiner Flassbeck <a href="https://www.relevante-oekonomik.com/2025/04/08/jeffrey-sachs-der-gleiche-fehler-wie-bei-den-anderen-neoklassikern/" target="_blank" rel="nofollow noopener noreferrer" translate="no"><span class="invisible">https://www.</span><span class="ellipsis">relevante-oekonomik.com/2025/0</span><span class="invisible">4/08/jeffrey-sachs-der-gleiche-fehler-wie-bei-den-anderen-neoklassikern/</span></a></p>
acemaxx<p><a href="https://econtwitter.net/tags/rollercoaster" class="mention hashtag" rel="tag">#<span>rollercoaster</span></a> week for <a href="https://econtwitter.net/tags/equities" class="mention hashtag" rel="tag">#<span>equities</span></a> and <a href="https://econtwitter.net/tags/bonds" class="mention hashtag" rel="tag">#<span>bonds</span></a>: <br />10% <a href="https://econtwitter.net/tags/down" class="mention hashtag" rel="tag">#<span>down</span></a> and 10% <a href="https://econtwitter.net/tags/up" class="mention hashtag" rel="tag">#<span>up</span></a></p><p>If something goes down 10% and then up 10%, you won't be back where you started. You'll actually end up with less than the original amount.</p>
acemaxx<p>The spread = SOFR swap rate – 10y UST yield<br />Normally this spread is positive, reflecting:<br />Credit/liquidity premium embedded in swaps,<br />Demand for USTs as "safe haven" assets,<br />Dealer balance sheet costs (swaps are often cleared; USTs take balance sheet space)</p>
acemaxx<p>(my two cents) One interpretation: “Risk-off” mood, flight to safety.<br />This might suggest:<br />Aggressive bid for Treasuries (e.g., geopolitical fear)<br />Receiving pressure in swaps (e.g., mortgage hedge flows)<br />Fed cuts are being priced more aggressively in the swap curve-</p>
acemaxx<p>The chart displays what traders will pay for extra liquidity via swaps rather than UST bonds; when it gets deeper, it tends to mean there’s a problem, chart @JohnAuthers.bsky.social <a href="https://www.bloomberg.com/opinion/authors/AT2bBytfUHQ/john-authers" target="_blank" rel="nofollow noopener noreferrer" translate="no"><span class="invisible">https://www.</span><span class="ellipsis">bloomberg.com/opinion/authors/</span><span class="invisible">AT2bBytfUHQ/john-authers</span></a></p>
acemaxx<p>Trump <a href="https://econtwitter.net/tags/tariffs" class="mention hashtag" rel="tag">#<span>tariffs</span></a> and US Financial Conditions Index - weaker <a href="https://econtwitter.net/tags/sentiment" class="mention hashtag" rel="tag">#<span>sentiment</span></a> and rising fears about <a href="https://econtwitter.net/tags/job" class="mention hashtag" rel="tag">#<span>job</span></a> loss or other hard times ahead could also boost <a href="https://econtwitter.net/tags/saving" class="mention hashtag" rel="tag">#<span>saving</span></a> rates and lower <a href="https://econtwitter.net/tags/spending" class="mention hashtag" rel="tag">#<span>spending</span></a>, chart @GoldmanSachs</p>
acemaxx<p>The <a href="https://econtwitter.net/tags/capex" class="mention hashtag" rel="tag">#<span>capex</span></a> tracker increased by 13pts b/w President Trump’s election and inauguration but has since declined and now stands at a level<br />slightly below the average since 2022, chart @GoldmanSachs</p>
acemaxx<p><a href="https://econtwitter.net/tags/doodle" class="mention hashtag" rel="tag">#<span>doodle</span></a><br />90-day pause on “reciprocal” <a href="https://econtwitter.net/tags/tariffs" class="mention hashtag" rel="tag">#<span>tariffs</span></a> – animal spirits?<br />From “Be Cool” to “Getting Yippy” – Note: <a href="https://econtwitter.net/tags/yippy" class="mention hashtag" rel="tag">#<span>yippy</span></a> is used to express exuberant delight or triumph – an example: a <a href="https://econtwitter.net/tags/yappy" class="mention hashtag" rel="tag">#<span>yappy</span></a> little <a href="https://econtwitter.net/tags/dog" class="mention hashtag" rel="tag">#<span>dog</span></a>, often making short high sounds.</p>
acemaxx<p>(must-read) <br />Heiner Flassbeck recalls how <a href="https://econtwitter.net/tags/Germany" class="mention hashtag" rel="tag">#<span>Germany</span></a> actually slipped into a CA-deficit in 1980. The country was in a state of shock. <a href="https://econtwitter.net/tags/Berlin" class="mention hashtag" rel="tag">#<span>Berlin</span></a> declared that not only the US, but also Europe, had the responsibility to revive the global economy.<br /><a href="https://www.relevante-oekonomik.com/2025/04/09/als-westdeutschland-einmal-ein-leistungsbilanzdefizit-hatte/" target="_blank" rel="nofollow noopener noreferrer" translate="no"><span class="invisible">https://www.</span><span class="ellipsis">relevante-oekonomik.com/2025/0</span><span class="invisible">4/09/als-westdeutschland-einmal-ein-leistungsbilanzdefizit-hatte/</span></a></p>
acemaxx<p><a href="https://econtwitter.net/tags/Japan" class="mention hashtag" rel="tag">#<span>Japan</span></a> - <a href="https://econtwitter.net/tags/inflation" class="mention hashtag" rel="tag">#<span>inflation</span></a> is also expected to rise solidly in April, as many companies plan to raise prices to reflect the recent rise in input costs.<br />However, the strong <a href="https://econtwitter.net/tags/Japanese" class="mention hashtag" rel="tag">#<span>Japanese</span></a> <a href="https://econtwitter.net/tags/yen" class="mention hashtag" rel="tag">#<span>yen</span></a> may ease some of <a href="https://econtwitter.net/tags/BoJ" class="mention hashtag" rel="tag">#<span>BoJ</span></a>'s concerns about rising upside risks to <a href="https://econtwitter.net/tags/inflation" class="mention hashtag" rel="tag">#<span>inflation</span></a> – chart @ING_Economics</p>
acemaxx<p>Still, <a href="https://econtwitter.net/tags/Fed" class="mention hashtag" rel="tag">#<span>Fed</span></a> has given no indication that it is close to acting — either to support <a href="https://econtwitter.net/tags/liquidity" class="mention hashtag" rel="tag">#<span>liquidity</span></a> or to <a href="https://econtwitter.net/tags/lower" class="mention hashtag" rel="tag">#<span>lower</span></a> interest rates, chart @economics <br /><a href="https://www.bloomberg.com/news/articles/2025-04-09/deutsche-bank-sees-fed-doing-emergency-qe-if-bond-rout-goes-on" target="_blank" rel="nofollow noopener noreferrer" translate="no"><span class="invisible">https://www.</span><span class="ellipsis">bloomberg.com/news/articles/20</span><span class="invisible">25-04-09/deutsche-bank-sees-fed-doing-emergency-qe-if-bond-rout-goes-on</span></a></p>
acemaxx<p>(rate cuts by PBoC soon?)<br /><a href="https://econtwitter.net/tags/China" class="mention hashtag" rel="tag">#<span>China</span></a>’s consumer prices fell for the 2nd straight month in March, while factory-gate <a href="https://econtwitter.net/tags/deflation" class="mention hashtag" rel="tag">#<span>deflation</span></a> worsened: CPI: -0.1% and -0.4%M, PPI: -2.5%Y, chart @reuters.com <br /><a href="https://www.reuters.com/world/china/chinas-consumer-prices-extend-declines-march-2025-04-10/" target="_blank" rel="nofollow noopener noreferrer" translate="no"><span class="invisible">https://www.</span><span class="ellipsis">reuters.com/world/china/chinas</span><span class="invisible">-consumer-prices-extend-declines-march-2025-04-10/</span></a></p>
acemaxx<p>My <a href="https://econtwitter.net/tags/doodle" class="mention hashtag" rel="tag">#<span>doodle</span></a><br />Trump’s highly praised «pro-business» economic policy:<br /><a href="https://econtwitter.net/tags/tariffs" class="mention hashtag" rel="tag">#<span>tariffs</span></a> - <br />almost always everyday another extraordinary tax increases on US consumers …</p>
acemaxx<p>In “weird times”, some investors prefer “cleared” <a href="https://econtwitter.net/tags/swaps" class="mention hashtag" rel="tag">#<span>swaps</span></a> over “on-the-run” USTs due to <a href="https://econtwitter.net/tags/collateral" class="mention hashtag" rel="tag">#<span>collateral</span></a> or counterparty concerns. That “raises demand for <a href="https://econtwitter.net/tags/swaps" class="mention hashtag" rel="tag">#<span>swaps</span></a>” and lowers their rates (flattening swap spreads).</p>
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