Market 03/26: Successful 5Y bond auction with record value

5Y T-bond auction successful with record USD 67 billion value

Today, the US Treasury holds the 5Y bond auction session with the highest value ever (67 billion USD)

FYI: This is the bond with optimal risk-return balance when:

• Sufficiently high yield + term of only 5 years keeps risk at medium-low level.

Due to this risk-return balance feature, demand in today's auction session is quite high:

• High Yield: 4.235% (market yield before auction: 4.245% | High Yield previous session: 4.320%) => stop-through 1bps

  • Ratio of bids awarded at High Yield: 81.56% (previous session: 89.61%)

• Bid-To-Cover ratio: 2.41 (= previous session 2.41)

• Breakdown of awards (competitive - competitive results):

  • There is 70.45% successful bid value from foreign investors (previous session: 63.53%)

  • There is 12.73% from Dealers (previous session: 16.81%)

Conference Board March consumer confidence continues to decline due to concerns about the future outlook

March consumer confidence index falls to 104.7, lower than estimate of 107 and previous month's 104.8

Although confidence in the current situation is optimistic, expectations for the future have declined:

• Expectations index falls to 73.8 from previous 76.3

• Present situation rises to 151 from previous 147.6

• Labor market index slightly declines after upward revision

US home prices rise for 12th consecutive month - despite high mortgage rates

S&P Case-Shiller: Home prices in 20 largest US cities rise +0.14% MoM in January (lower than expected 0.2%), equivalent to +6.59% Y/Y

• National average home price +6.03% Y/Y, higher than previous +5.57%

• Home prices only dipped slightly in this cycle and continuously rose back despite high mortgage rates.

• Home prices lag interest rates: With mortgage rates maintained above 7%, home prices should not have much room to rise

FHFA home price index for January is more reliable: down -0.1% M/M, lower than estimate +0.3% and previous +0.1%,

• But this is also the first decline since August 2022, prior to which prices were still rising.

Industrial indicators: February orders, Manufacturing / Non-manufacturing indices from Richmond, Philly and Dallas Fed for March

1. February Orders

February Durable Goods Orders Increase: +1.4% M/M, (estimate +1% | previous month: -6.9%)

• Durable Goods Orders Excluding Transportation +0.5% M/M, (estimate +0.4% | previous month: -0.3%)

• Nondefense Capital Goods Orders Excluding Aircraft (capital goods orders nondefense ex-air) +0.7% M/M, up from -0.4% previous month

2. Manufacturing / Non-Manufacturing Indexes from Richmond, Philly

Richmond Fed March Manufacturing Index Unexpectedly Drops to -11 (estimate & previous month -5)

• Philadelphia Fed March Non-Manufacturing Index Drops Sharply to -18.3 (vs -8.8 previous month) - currently at the lowest level since April 2023

3. Dallas Fed Manufacturing Index

Clear divergence in current manufacturing outlook (decline) and production forecast (increase) in Dallas Fed survey:

• Employment index returns to positive territory, while wages and benefits have started to stabilize at higher levels

Cryptocurrency market: FTX token exchange collapse from 2022 still unresolved

FTX (world's 2nd largest digital token exchange in 2021) filed for bankruptcy in November 2022, however, asset liquidation has not yet concluded:

• FTX just sold 2/3 stake in AI company Anthropic for 884 million USD

• Meanwhile, a group of FTX customers is demanding compensation for 3 lost Sam Coins tokens (Serum + MAPS + OXY)

US sanctions Fintech companies linked to Russia for illegal cryptocurrency activities

A woman in the UK convicted of money laundering 2.5 billion USD through Bitcoin - the largest money laundering case in history

Other news: Baltimore Bridge Collapses After Container Ship Collision

1. Major bridge in Baltimore collapses after container ship collision. At least 20 people and multiple vehicles fall into the river. The ship also catches fire after the collision.

• Biden wants US Government to fund rebuilding of Baltimore Bridge

=> Related insurance companies may face significant impact

2. Alibaba cancels IPO plans for logistics company Cainiao. Instead, Alibaba will buy back 36% shares from other shareholders to fully control the company

3. iPhone shipments to China drop ~33% Y/Y in February, indicating decline in demand in the company's most important foreign market.

4. Trump Media stock, $DJT, surges over 55% on first trading day. Stock now up nearly 100% in past 5 days and 375% in 2024.

5. Cocoa price surges to nearly 10,000 USD, all-time high. In 2024 alone, Cocoa price has risen 130% and outperformed most assets.