00:00So what on earth do you make if the bond market moves of the past 24 hours?
00:04You're taking a deep breath and bracing for more perhaps.
00:09I couldn't believe the price action yesterday.
00:12You know, about this time yesterday, yields were slightly softer on the day.
00:15Just a massive reversal.
00:17And I tell you what, if you had told me yesterday that the big catalyst to supercharge it was going
00:22to be PMI data,
00:23I would have laughed at you.
00:25I'm sorry.
00:25It wasn't on anyone's bingo card as being the major catalyst.
00:28But those PMIs were just so incredibly strong.
00:31And they kind of ended any debate that monetary policy in the U.S. is still way too loose.
00:38The economy is hot.
00:39We already have an underlying inflation problem.
00:41And the monetary policy is loose.
00:43Financial conditions are easy.
00:44And therefore, it immediately priced in a higher likelihood of back-to-back rate hikes this year.
00:50I think October is almost going to be a sure thing when it comes to the data next week,
00:55if that will be the kind of confirmation signal.
00:58So we get an October hike, and people expect another one then in December.
01:01So bonds are suffering from strong economy, hot inflation.
01:05And then we got the jump up in energy prices.
01:07Crude was already pressuring it.
01:08The price action in Treasuries was actually a little bit disappointing already when oil was falling.
01:14And then oil bounced back up and made them more vulnerable.
01:16And then we got the PMI data.
01:17And then we got this ridiculous proposal of a diesel export ban.
01:21It was just basically a whole combination of factors that really hit the bond market hard.
01:26And most of those things are coming out of Washington, are coming out of the administration's policies.
01:32Mark, what's the chat?
01:34I heard Friday that a number of funds got into trouble on the big OAT move.
01:37This was an epic move, and it was across a number of different markets.
01:41Are funds getting into trouble?
01:42It's a very crowded market out there.
01:47They definitely must be.
01:48I have not yet heard who is getting hurt right now.
01:52I wouldn't say the names on live TV, even if I had.
01:55But, you know, we know that a couple of weeks ago, the front-end move in Bunsen-Gilts kind of
02:00stopped out quite a few big names already.
02:03And I'm sure we're going to find out in the coming days that there was a little bit more damage
02:08yesterday.
02:08It has certainly changed.
02:09Those PMIs changed the narrative again here, and they've put treasuries back in the back foot.
02:14Long-term institutional yield income collectors are happy kind of slowly nibbling into the sell-off in long-end treasuries,
02:21which is why the curve will continue to flatten.
02:23But overall, it's put treasuries on the back foot again.
02:27And the prospect for stocks then in that environment, Mark?
02:32You know what?
02:34Ultimately, stocks will be fine.
02:35Remember, the yield's higher because the economy is so hot.
02:38Because growth is so good.
02:39Short-term, look, we know about the September seasonality.
02:42We've been talking this week about the structural story is very good for stocks.
02:44But this is a September seasonality.
02:46What's going to be the negative catalyst?
02:48We didn't see it there.
02:49I think there's a chance that, you know, with this slightly higher energy prices,
02:52with the disappointment around the negotiations between the US and Iran,
02:55there's still a chance for a bit more weakness into next week.
02:58I do think October will then likely be a very good month for stocks, despite higher yields.
03:03They're more of a speed bump that caused volatility.
03:05But strong earnings will bring the stock market higher ultimately.
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