Market 06/10: 58 billion 3Y bonds dismal auction with credit interest rates reaching record

58 billion USD 3Y Treasury bills auction unpromising: demand continues to decline

• High Yield: 4.659% (market yield: 4.648% | previous session: 4.605%)

  => Tail: 1.1 bps

  • Successful bid ratio at High Yield level: 53.41% (previous session: 87.59%)

• Bid-to-Cover: 2.43 (previous session: 2.63)

• Competitive award components:

  • Dealers: 19.96% (previous session: 14.87%)

  • Foreign investors: 64.14% (previous session 65.52%)

April credit debt unexpectedly drops as credit borrowing rates hit record high

US consumers finally start limiting credit borrowing for spending as credit rates reach ~22% / year:

• Total consumer credit in April increases +6.4 billion USD, much lower than estimate of +10 billion USD

• March figure revised down from +6.3 billion USD to -1.1 billion USD - largest decline since August 2023

• Revolving credit, i.e., credit card debt in April decreases -0.5 billion USD - first negative figure since Covid

• Reason: average US credit card interest rates reach record high 21.59%

However, total credit card debt remains at record high while personal savings rate at lowest since 2022.

NY Fed: Consumer inflation expectations decrease in short term

• Average 1-year inflation expectation drops to 3.17% in May (from 3.3% in April)

  • 3-year inflation expectation unchanged (2.76%) — while 5Y inflation expectation rises to (2.82%).

Consumer expectations:

• Medical costs +9.07% Y/Y

• College education costs +8.45% Y/Y

• Rent prices +9.08% Y/Y

• Consumer expectations for stock market gains rise to 3-year high

Crypto Market: Bitcoin whales open giga long positions on Bybit and OKX

Bitcoin whales have opened giga long positions on Bybit and OKX:

• When whales open giga long positions -- meaning they are betting on a significant Bitcoin price increase.

• This causes other investors to have confidence in the market => domino effect makes BTC overbought.

• The last time this event happened was when BTC was at 29,000 USD, and it caused BTC to increase 155%

• Bitcoin ETF funds have bought up all the BTC mined in 2 months just in the previous week

• The amount of Bitcoin bought in that week alone is nearly equal to all of May - this is the largest buying week since mid-March

European Parliament Election: Far-right parties win across the board

Europeans have collectively leaned Right as they are fed up with the massive influx of immigrants:

In France:

• National Front party of far-right leader Marine Le Pen wins a landslide in the European Parliament election:

  

• President E.Macron immediately announced the dissolution of the National Assembly and called for early legislative elections in France.

In Germany: Parties in the current coalition government suffer severe defeat

• Conservative Party secures victory with 30%

• Social Democratic Party (SPD) of Chancellor Olaf Scholz records the worst result in history – with 13.9% of total votes

=> Far-right groups (including parties not very friendly to immigrants) are gaining ground in the European election

Center-right European People's Party (EPP) will be the largest political group in the new legislative body, gaining 5 seats for 189 delegates.

Key economic events for the week 06/10 - 06/16

1. OPEC Monthly Report - Tuesday

2. May CPI inflation data - Wednesday

3. Fed interest rate decision (FOMC) - Wednesday

4. Fed press conference - Wednesday

5. May PPI inflation data - Thursday

6. MI consumer sentiment data - Friday

• Schedule of corporate earnings releases:

Other news

1. Nevada Copper mining company files for bankruptcy after failing to raise additional capital

2. AMD stock downgraded on growth by Morgan Stanley due to: limited upside—despite the current AI chip wave.

3. Nvidia just executed a 10:1 stock split on 06/07, stock price slightly up in today's session.