US 2Y on Fire + Magnelibra Tracker Updates

MEGA8s wavering?

So Friday we saw some interesting movements in both the equities and bonds, more so in bonds actually. We are beginning to see a large front end steepening play transpire as US Govt 2s are well bid against the rest of the curve spectrum. You can see this move in laid out from Friday’s US yield curve settlement shown here:

2s were down a massive 7.2 basis points while the long end 30Y was +3.1bp this led to a huge 10.3bp steepening in the 2s30s and you can see the rest of the curve followed along as 5s outperformed the longer durations as well. Is this the beginning of a larger move that sees the front end pegged near 4.5/5% while the longer end stagnates with the hawkish for longer FOMC?

History has proven that as we get closer to the next easing cycle, that yield curves tend to re-steepen as the global bond players front run the next rate cutting cycle. Now we know inflation is still a problem, however, as we have stated time and time again, we can only push interest rates so high. They tend to add to inflation because of the interest creation mechanism. We would rather see the FRB get more aggressive with their reduction of their balance sheet which is only down a paltry 6.7% off the highs. We know that over $5T still exists as RRP and IORB so that is a lot of cake earning risk free interest!

However if this steepening is the start of something larger, then we would suspect that the MEGA8s would start to see some selling vs the broader markets and that is what we have possibly begun to see. Even with Friday’s settles, the MEGA8s are up a massive $1.613 Trillion in 2 months!!!

When we look at the Magnelibra MEGA8 tracker we can see we have stagnated a bit here and some consolidation and selling is occurring:

We will continue to be aggressive in the hedging of this now as we sit here at the current levels because a broader move may be occurring but consolidative equities is also great to capture premiums out of the market and hedge future potential downsides.

As far as the Magnelibra GFBP Futures Tracker, it should benefit from the longer fixed income and shorter Nasdaq vs other indices and Friday captured some of that positioning in our educational futures sentiment tracker:

Finally here are the settlements from Friday 7/7/2023 with Crude Futures the leader on the board, just outpacing Silver and the Nasdaq the weaker of the bunch:

Ok we will be back with more later tonight! We live in interesting times and we wanted to tell our readers about a new movie called Sound of Freedom, the link to the trailer can be found, Here

This is a very emotional movie, its played by one of our favorite actors and faith based advocates Jim Caviezel. It is not for the faint of heart but touches upon the very under-reported but devastating topic of child trafficking. We can’t stress enough that a movie like this is important to spreading awareness to a problem that has existed since the beginning of time and we as a collective humanity deserve a better world, a fairer world for the betterment of opportunity, for salvation, for freedom and we owe it to ourselves to become fully aware of such atrocities. This topic strikes at the very heart of evil, the real evil that exists in our world, not in spiritual form but physical and it should never be tolerated. We should be protecting our children, not exposing them to torture and despair, Magnelibra is a huge advocate of this movie and we suggest you gain the courage to see it.

DISCLAIMER: For educational purposes only. This is not a solicitation to buy or sell commodity futures or options. The risk of trading securities, futures and options can be substantial and is not for everyone. Such investments may not be appropriate for the recipient. The valuation of futures and options may fluctuate, and, as a result, clients may lose more than their original investment. Nothing contained in this message may be construed as an express or an implied promise, guarantee or implication by, of, or from the author Michael Agne owner of Magnelibra Capital Advisors. Magnelibra the CTA and its Global Futures Benchmark Program may hold long and or short positions in the various futures and markets that Magnelibra covers. We will never claim that you will profit or that losses can or will be limited in any manner whatsoever. Past performance is not necessarily indicative of future results. Although care has been taken to assure the accuracy, completeness and reliability of the information contained herein, we make no warranty, express or implied, or assume any legal liability or responsibility for the accuracy, completeness, reliability or usefulness of any information, product, service or process disclosed.

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