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Global Bonds Rally as Meta, Growth Concern Fan Demand for Havens

edited February 3 in Other Investing
(Excerpt) The rally came as technology bellwethers Meta Platforms Inc. and Spotify Technology SA forecast slowing growth, adding to concerns that monetary policy tightening will hurt the global economy.“The main news this morning is Meta’s numbers falling short of estimates,” said Andrew Ticehurst, rates strategist at Nomura Holdings Inc. “This has given us a bit of risk off, with E-mini around 1% lower, the Aussie and kiwi a little softer and bond yields down a few basis points,” he said, referring to S&P 500 futures.Benchmark 10-year yields in Australia and New Zealand fell at least four basis points. Treasuries rallied across the curve, with the 10-year yield down one basis point to 1.76%. Japan’s benchmark held steady at 0.175% after touching a six-year high of 0.185% this week.

What’s interesting is that late Wednesday evening the futures markets are looking glum, with the NASDAQ off 2.25%. Asian markets lower as well. Hoping not a bad sign for Thursday. I also think the movement in bonds is interesting - especially if it carries over to the U.S. markets Thursday.. FWIW - I can’t see how the issues re the Ukraine can be helping matters any.

Bloomberg is quoting 1.76% on the 10 year late Wednesday. That’s very close to the 1.74% it reached last March, So the Fed can “huff and puff” all they want. Yes, they can push short term rates a lot higher. But if longer term rates (market driven) don’t cooperate they face a real dilemma ISTM.

https://finance.yahoo.com/news/global-bonds-rally-meta-growth-014605670.html

(Had better luck with this link not running my ad blocker. Not a lot of news at late night hour, so took what could find.)

Comments

  • edited February 3
    I'll be interested to see how much contagion there is end of day following the FB news.

    Bit of a bummer that one of my "conservative" allocation funds (PROVX) is ~4.7% FB.

    One more comment (which perhaps gives away my age) -- not getting the metaverse hype.
  • @Shostakovich: I don’t get “metaverse” either, having been born in the middle of WW II. I do like a conspiracy theory as well as the next guy. To wit: the FB team saw the terrible earnings numbers looming and invented a smokescreen or a diversionary tactic with the new company name.
  • edited February 3
    Getting complicated. The U.S. 10 year rate did a U-Turn this morning and bounced much higher after the European Central Bank alluded to worsening inflation and indicated rates might rise. . At last glance, the U.S. 10 year was at 1.83%, up from 1.77% last night.

    (Thanks @Yogibearbull for the correction.)

    Story re ECB

    10-Yr Treasury Yield

    Here’s a recent thread on RLSFX. I noticed at the time that it had roughly 3.5% in Meta Platforms.
  • edited February 3
    The ECB was on HOLD with the rates but MAY raise rates twice this year.
    https://www.cnbc.com/2022/02/03/ecb-rate-decision-february-2022-inflation-.html

    With the US media wild on speculations of 3-7 rate hikes by the Fed (5 by the fed fund futures market), any bond (price) upticks should be short-lived.
  • +1 / Thanks yogi for the correction.
  • Last year it was SPAC's, this year it's META Neither made sense to me and last I checked SPAC's flamed out horribly and not in a good way. Zuckerberg can change the name all he wants but that face will stay the same. I'm inclined to think that the company problems has more to do with their social media postures as Facebook than whatever it is he thinks they're doing now.
  • M* JR has an article today on falling dominos: ARK, SPACs, meme stocks, SC-growth. Next? Some LC-growth. https://www.morningstar.com/articles/1076351/the-stock-markets-dominoes-are-falling
  • @Mark -- the metaverse is more than a name change or re-brand as i understand it. Zuck has been working for sometime on related projects (oculus). I don't think it's smoke and mirrors.

    That said, i struggle to see the allure of a all-encompassing virtual reality platform (although i had a junior colleague tell me few years ago that many of her peers were actively planning to live the majority of their lives in the virtual world).
  • edited February 3
    Powell referred to the yield-curve, and especially to the 2Y-10Y spread as being "normal". That spread was only 72-76 bps on the FOMC days. The spread fell further since (i.e., yield-curve flattened further, as it has been since mid-2021) and seems to have stabilized at 62 bps. It won't take a lot to invert it.
    https://stockcharts.com/h-sc/ui?s=$UST10Y-$UST2Y&p=D&yr=1&mn=0&dy=0&id=p63701978388
  • edited February 3
    Inverted Yield Curve: "The World Turned Upside Down."

  • edited February 3
    Yield curve flattener etf: BNDD.

    Remember IVOL? Same fund company, opposite approach to the yield curve.
  • @Shostakovich - seriously!? How sad is that. I'd much rather go for a walk in the woods or a stroll along the shore. And so I do.
  • XLC (Communications Services Select Sector SPDR Fund) has a 23% position in FB yet is only down roughly 6.5% 0n the day.
  • edited February 4
    "For years Meta has been one of the largest stocks by market cap and one of the most widely held names by mutual funds, and a handful of them have particularly large weightings in the company in their portfolio.
    We looked at which funds invested the most in Meta, and which had the highest exposure within their portfolio."


    Link
  • M* revised FB fair value estimate, updated after the earnings release, is $400, signifying a potential gain of approx 75% from today's low. YMMV. I do not plan to own it.
  • Thank you for the link, @Observant1
  • This statement from @Observant1's link just slays me: "Meta, the parent company of Facebook, dropped roughly 25% Thursday after reporting mixed fourth-quarter earnings. That shaved $200 billion off Meta’s market value--an amount greater than the entire market valuation for McDonald's (MCD)."

    I never considered the valuation of companies like FB in these terms. At least McDonald's has great french fries and FWIW I am a shareholder.
  • edited February 5
    Mark said:

    I never considered the valuation of companies like FB in these terms. At least McDonald's has great french fries and FWIW I am a shareholder.

    You prefer Ronald McDonald over Zuck? Let’s hope they never invent virtual food.

  • edited February 5
    Coming soon to a Virtual Meta World near you !!!
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