Market 05/08: Demand returns in the 42 billion USD 10Y Bond auction

10Y Treasury Bond Auction: foreign investor demand returns

• High Yield: 4.483% (market yield: 4.473% | previous session: 4.56%)

  => Tail: 1bps

  • Success ratio for bids at High Yield: 0.48% (previous: 54.10%)

• Bid-to-Cover: 2.31 (previous: 2.31)

Competitive award components:

• Dealers: 15.73% (previous: 23.96%)

• Foreign investors: 65.52% (previous 61.81%)

→ Despite light tail, demand has returned, especially from foreign investors.

Fed Collins: Economy needs to weaken for inflation to sustainably drop to 2%.

Statement from Fed official Collins:

• The economy needs to weaken for inflation to sustainably drop to 2%.

  • i.e. if the economy remains strong, inflation may decrease but could rise again if demand stays high

• Current tightening policy is appropriate.

• It would be risky to cut too early.

• Labor market is gradually balancing.

Oil prices recover after overnight inventory build report

API Report:

• Crude +509,000 (-1.4 million expected)

• Cushing +1.339 million

• Gasoline +1.46 million

• Distillates +1.713 million

DOE Report:

• Crude -1.36 million (-1.4 million expected)

• Cushing +1.88 million

• Gasoline +915,000

• Distillates +560,000

• Government added 947,000 barrels to SPR last week - highest since Dec 2023.

• Crude production unchanged at 13.1 million bpd (near record high).

• WTI trading around 78 USD, at MA100.

Wholesale inventories decline in March

• March wholesale inventories decline -0.4% MoM (previous: +0.4%)

• Wholesale sales decline -1.3% MoM (previous +2%) but still up +1.4% YoY, reaching 662.8 billion USD.

Americans maintain credit card spending despite consumer debt burden

• Consumer credit growth slows significantly to +2.3% YoY in March.

• However, credit card usage rate remains high (green), although consumer sentiment (orange) has declined relatively.

• Revolving consumer credit (revolving consumer credit), including credit cards, only increased by 152 million USD in March - the smallest increase since April 2021.

Crypto market: Grayscale withdraws Ethereum Futures ETF application

1. Grayscale withdraws Ethereum Futures ETF application before SEC deadline.

• Traders increase short on Ether after this news.

2. Argentine company YPF partners with Bitcoin mining company GDA (Genesis Digital Assets) to mine Bitcoin using gas fuel.

Company earnings reports: Uber, Shopify, Toyota

Uber ER: Booking forecast to decline in Q2

• Gross booking: up +20% YoY, reaching 37.7 billion USD.

• Number of trips: up +21% YoY, , reaching 2.6 billion USD.

• Revenue: up +15% YoY, , reaching 10.1 billion USD (> estimate by 40 million USD).

• Operating margin: 2% (up +5% YoY).

• Adjusted EBITDA: up +82% YoY, , reaching 1.4 billion USD.

Q2 FY24 forecast:

• Gross booking: ~39.5 billion USD (expected 40 billion USD).

• Adjusted EBITDA: ~1.5 billion USD.

• Recently, Uber faces a 250 million pound lawsuit from taxi drivers in London.

Shopify ER: Stock drops after weak Q2 forecast

• GMV (Total value of goods sold on platform): up +23% YoY, reaching 61 billion USD.

• GPV (Gross Payment Volume): accounts for 60% of total GMV (+4% YoY).

• MRR: up +32% YoY, , reaching 151 million USD.

• Revenue: up +23% YoY, , reaching 1.9 billion USD (> estimate by 10 million USD).

  • Net loss 273 million USD, ~21 cents/share.

• Operating margin: 5% (up +23% YoY).

• Non-GAAP EPS: 0.20 USD (> estimate 0.03 USD).

Q2 FY24 revenue growth forecast: up 10% YoY.

Toyota ER: Record net profit - Focus on investment in EVs and AI

• Sales revenue: 45.1 trillion JPY.

  • Toyota benefits from weak yen + increased demand for gasoline-electric hybrid vehicles in some markets (like the US).

• Net profit: 4.94 trillion JPY.

• Operating income: 5.35 trillion JPY.

FY2024 profit forecast at 4.3 trillion JPY, down 20% YoY.

• Toyota plans to invest 1.7 trillion JPY in AI and electric vehicles.

Other news:

1. iPhone sales in China up 12% in March after implementing discount programs.

2. US restricts China's access to AI software (like ChatGPT).

3. Atlanta Fed GDPNow Q2 growth surges to 4.2% (> previous 3.3%).

3. Indeed Job Postings index continues to decline near -14% YoY and down -31% from the peak at the end of 2021

   • Number of job openings also down from 8.5 million to 8.2 million since end of March.

4. Biden administration revokes export licenses for AI chips from Intel and Qualcomm to China for sale to Huawei.

5. European stock market hits all-time high after strong earnings season.

   • STOXX 600 up 0.3% to record high.

   

   • FTSE 100 also hits new record.