Good morning – As I survey the post-July 4th environment, I see some absolutely incredible moves in may corners of the market.
First, Treasury bonds are flying. Long bond futures are up another 18/32 as I write, extending a 10-point rally that began on 6/24. Both 10-year and 30-year Treasury yields plunged to all-time low yields yesterday, and they’re dipping even further today.
Gold is flying once again, rallying another $15 to 28-month high. Shares of major European banks are falling fast, with Deutsche Bank (DB) in particular hitting an all-time low (for its U.S.-traded ADRs). And the key “risk off” currency, the Japanese yen, is surging again – closing in on the 100 level against the dollar.
These moves are getting pretty darn extended in the short-term.
Over the longer term, though, these moves scream “Quantitative Failure” – and suggest that there is zero confidence in the ability of central bankers to juice the economy anymore.
What’s more, if you didn’t see the news, a handful of multi-billion-dollar U.K. real estate funds have “gated” their investors, preventing withdrawals to a surge in redemption requests. Investors are clearly worried that massively overvalued commercial real estate will lose value due to Brexit.
But I could argue that real estate assets are way overvalued here in the U.S., too. So it will be interesting to see if this British trend goes global.