00:00Mark, the news flow this morning seems to be a lot about yields, things that will move bond markets.
00:05It certainly is about Schnabel getting the week started with something a little bit hawkish.
00:11Absolutely. Schnabel is the news flow. That's kind of the latest marginal development in terms of forcing yields higher.
00:19But the bigger, very much longer term macro backdrop is exactly as Ray Dalio outlined.
00:25We just have a world which is where we've got kind of overburdened with government debt.
00:30And fiscal promises that we probably can't deliver.
00:33And that means ultimately we're going to continue getting higher yields and probably have to monetize that debt.
00:38And that fuels anti-fiat trades. It fuels kind of inflation because we're essentially trying to inflate away that debt in a controlled manner.
00:45That is the biggest, the bigger backdrop theme. And that's going to be a big theme into next year.
00:50Now, this is a very choppy time of year. But I think in the short term dynamics around that theme,
00:55I don't need to have Dr. Isabel Schnabel's comments, but we have the Fed this week, which is expected to be a hawkish cut.
01:00And we have JGB auctions. So there's a few dynamics this week that might help in the very short term.
01:07How important are the dots going to be this week? What are we going to learn from the dots?
01:11Are they useful going into 2026 with the new Fed chair coming in and so much uncertainty surrounding the U.S. economic outlook?
01:20They're not useful into 2026, but they're a massive tradable moment this week. This time of year is really interesting.
01:29This is a great market for traders. People are alert to kind of mispricings.
01:33Part of the reason it's such a good market for traders is it's actually quite bad for the macro person.
01:37This is not the time of the year to kind of get involved in those longer term trades, particularly ahead of the Fed this week.
01:43And then after that, we get a decline in liquidity. So, you know, people wait till January to get really involved in the macro trades again.
01:49But it's because of that. It's because that kind of declining participation from the macro community that for traders, there's real opportunities.
01:55And so I think the dots will be super interesting this week. But no, they won't last in relevance until the new year.
02:02Mark, we're getting some lines coming through out of China saying that President Xi says that they're continuously trying to expand domestic demand.
02:09And I guess some of the other news flow we got over the last 24 hours was around the export engine in China.
02:14No doubt. Well, they seem to be able to cope with exporting less to the United States by just exporting to Latin America and Europe instead.
02:23And I wonder how much that's going to be a dynamic that we need to keep in focus in 2026.
02:29Yeah, I think it's an ongoing dynamic. One of the things that's really interesting this year is people get very focused on dollar yuan falling by the most in five years.
02:36That's purely a dollar trade. Dollar yuan is not a good measure of the yuan. It's a measure of dollar. It's a low beta proxy for the Bloomberg dollar index.
02:44In fact, the yuan on a trade-weighted basis is having its worst year since 2017. So it's worst year in eight.
02:50The yuan is depreciating this year against its trade partners to most trade partners.
02:54And particularly you've seen the euro yuan trade, which is really fueling its exports.
02:58And that's why China trade is holding up so good. And that's why the Chinese stock market is an outperformer, despite the fact they can't stimulate domestic demand.
03:06And I think that will be a dynamic again next year because of the weak yuan.
03:09It'll help the Chinese stock market to outperform again next year.
03:12And it'll be an ongoing concern for the government as well to address.
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