Senior PM. Central bank nerd. Sport fanatic. Food lover. Enthusiastic but pathetic chess player. Views are my own.
Paris, France
Joined April 2014
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IFO Germany Manufacturing “Prices vs previous month” index is back at its long-term average.
The oil-driven surge in price pressures seems to be already over.
Je fais des infidélités au vélo ce w/e.
Question pour des champions : reconnaître ce stade mythique. 😜😜😜
Vous pensez que je peux encore faire combien de bornes avec ? @AlainPitous @GeslinAnthonyG1 @StephaneDeo @FerrariUgo1 😜
Oil and markets, a key shift.
Until mid-Sep, oil and US real yield were POSITIVELY correlated.
The narrative: higher oil -> inflation -> Fed hikes -> higher real yields.
Since mid-Sep, the correl is NEGATIVE.
The new narrative: higher oil -> growth fears -> lower real yields.
US corpo borrowing costs have risen. But...
- IG yield (the cost of issuing debt) are up 118 bp, from 4.81% at the start of the year to 5.99%.
- The average coupon on outstanding debt is up 16 bp (4.47% to 4.63%).
The impact on companies’ interest bills is much more gradual.
European gas storage remains well below historical levels. A worrying sign ahead of winter.
Markets are now pricing in the risk: gas prices are up 174% since the start of the year.
The 1-year rate in 5 years can be seen as a proxy of where markets expect short-term rates to settle. I.e. a proxy of terminal rate.
Japan’s move is striking: from below 0% in 2020 to 2.7% recently. Quite a repricing!
😍😍😍
Sale weekend pour la @FFLose !!!
🚨 𝙄𝙉𝘾𝙍𝙊𝙔𝘼𝘽𝙇𝙀 ! À 37 ans, Vincent Luis sacré champion du monde IRONMAN à Kona cette nuit ! 🇫🇷🏆🤯
Le Français réalise un 𝐸𝑋𝑃𝐿𝑂𝐼𝑇 monumental à Hawaï en remportant les mondiaux IRONMAN pour sa première ... participation ! 🌺🔥
🏊♂️ 3,8km de nage à 1min17 / 100m
🚴♂️ 180 km de vélo à 42,24 km/h
🏃♂️ Marathon couru en 2h38’35’’ (3:45/km)
⏱️ Chrono total → 7h47’27’’
🥇 Champion du monde IRONMAN
Vincent Luis entre dans la légende mythique de KONA ! 🥹
The main driver of the EUR/USD is the interest-rate differential.
But sovereign risk premia in peripheral Europe is also a factor. Their recent rise helps explain the EUR’s weakness.
Very impressive indeed!
Total unemployment rate went from 28.3% in July 2013 to 7.4% in August this year.
Stephane Deo retweeted
Emerging markets have required this analysis for years (and we agree). Debt/ revenues is a classic and US is still at 400% and probably doesn’t hit 500%
Showing government deficits as a share of GDP is kind of a fraud.
It implicitly assumes that governments can use 100% of GDP, i.e. that they can tax 100% of everything.
Measuring the deficit as a share of government receipts seems more appropriate.
Here are the results:
France 10 year yield is 140 bp above Germany this morning.
You liked "le spread" widening?
You will love the French banks’ CDS widening.
Below chart: 5Y CDS of SocGen, BNP & Credit Agricole.
European core inflation at 2.5% in September after 2.4% in August. Looks reasonable.
But, it’s running at 3.0% over the past 3 months (annualized) and 4.0% month-on-month (annualized).
It’s clearly accelerating. Sign of second round effects from oil prices?
Given the relation between sovereign's rating and spreads to Germany, a spread of 135bp would be consistent with a BBB- rating.
That's France this afternoon: just one notch away from "junk bond" territory.
Both the Fed and the ECB have accumulated large holdings during the QE period. Both reduced it steadily from mid-2022 through 2025.
But since the beginning of this year, the divergence is striking: the ECB is still shrinking its holdings, while the Fed is expanding again.
