Large Treasury settlements this week are set to remove roughly $130 billion from the overnight funding market, with the reverse repo facility now nearly depleted. With liquidity tightening, repo rates rising, and market breadth weakening, funding for new debt issuance may increasingly pressure rates, equities, and money market balances.
Category: Monster Market Commentary
Markets Brace For Inflation’s Big Return
In this week’s free YouTube Video, we prep for the July CPI report, which could play a crucial role in shaping market expectations for inflation. Market-based measures, such as inflation swaps, currently project elevated inflation into 2026, with attention focused on whether upcoming data confirms, accelerates, or challenges these trends.
Second-Quarter 2025 Thematic Growth Update
8/4/25 The current market environment isn’t for the faint of heart. Significant drawdowns in the first quarter, followed by substantial rallies in the second, have created one of the most challenging landscapes I’ve encountered in years. Writing these letters is rarely easy, and this quarter is certainly no exception. In the first quarter, trimming our …
Liquidity Drain and Diverging Breadth Hint at Potential Market Turn
The S&P 500 failed to hold early gains, closing slightly lower and stalling at key Fibonacci retracement levels, raising the possibility of a trend change. Weakening market breadth, tightening liquidity from Treasury General Account (TGA) refilling, and global yield spread shifts are reinforcing caution signals for equity investors.
Quiet Stock Markets Mask Critical Yield Curve Developments
Apple’s strength drove the S&P 500 higher in an otherwise subdued market session, with broader indices showing minimal change. Yield curve spreads indicate potential steepening scenarios ahead, influenced by rising inflation expectations and possible stagflation risks.
Stock Market Momentum Falters Amid Weak Economic Data
Markets retreated slightly after disappointing ISM services data pointed to weakening economic momentum, raising concerns ahead of next week’s CPI release. Technical indicators show key indexes at pivotal retracement levels, while the dollar struggles to regain bullish momentum despite recent attempts.
Stocks Rebound, But Bond and Volatility Indicators Urge Caution
Stocks rebounded on Monday after a sharp sell-off last Friday, despite persistent bearish signals from technical indicators and muted activity in bond yields and currency markets. Volatility eased slightly, driving the rally, though rising bond volatility (MOVE Index) suggests continued caution.
Market Stumbles as Employment Report Misses Badly
Stocks declined sharply after July’s job report severely missed expectations, compounded by large downward revisions for prior months, shaking investor confidence. Treasury yields fell dramatically, reflecting market anticipation of faster-than-expected rate cuts, while technical indicators for the S&P 500 suggest potential further downside risks.
Stocks Retreat Amid Rising Dollar and Volatility Signals
Despite strong performances from Meta and Microsoft, the S&P 500 fell amid rising volatility and a hotter-than-expected PCE report, with technical patterns hinting at potential market weakness. With the dollar strengthening and implied correlations climbing, investor focus now shifts to a potentially market-moving jobs report.
The Dollar Soars as Fed Holds Rates Steady
Stocks fell following the Fed’s decision to maintain interest rates and Jay Powell’s cautious stance toward rate cuts, while a stronger dollar and climbing Treasury balances threaten market liquidity. Copper prices plummeted by 17% after Trump imposed a surprise tariff, raising new questions about inflation forecasts.
Market Stalls Amid Conflicting Signals
Weaker-than-expected JOLTS data led Treasury yields lower despite persistent support levels, while the dollar advanced for the fourth consecutive day amid mixed economic signals. Notable divergences—particularly in USDJPY, Treasury yields vs. inflation expectations, and equities vs. high-yield spreads—highlight ongoing market uncertainty, with investors seemingly awaiting a clearer catalyst.
Overbought Market Meets Rising Dollar and Tightening Liquidity
Markets opened the week with little fanfare despite key developments in Treasury funding plans and a strong dollar move, particularly against the euro. With the S&P 500 remaining overbought and the Treasury set to borrow over $1.5 trillion across two quarters, upcoming issuance details could prove pivotal.
Complacent Markets Face an Avalanche of News
This week brings numerous critical events, including key economic reports, significant Treasury auctions, major central bank decisions, high-profile earnings, and a court case reviewing presidential tariffs. Despite these volatility catalysts, current implied volatility remains suspiciously low, suggesting a potentially significant market disruption if trading remains overly complacent.
Wingstop and Coreweave Weakness Raises Market Concerns
Japanese government bonds (JGBs) are nearing a significant breakout point, potentially driving yields higher and impacting the USDJPY exchange rate, which hinges on the narrowing US-Japan rate spread. Meanwhile, earnings-driven volatility from Alphabet and Tesla, alongside weak sentiment toward Wingstop and Coreweave, highlights broader market caution as momentum fades in key indices like IWM.
Volatility Levels Signal Caution With The S&P 500 in Unusual Territory
The S&P 500 is experiencing exceptionally low volatility and implied correlation, a pattern historically associated with market peaks, suggesting potential caution ahead. Combined with elevated tail-risk signals from the rising SKEW index, these indicators point toward possible instability in market dynamics.
Gold Eyes Breakout as Yields and Dollar Falter
Stocks stagnated as rates and the dollar fell, pushing gold and copper higher.
Market Pushed to the Max as Volatility Measures Hit a Wall Ahead of Earnings
Strange day of trading with the market trading sharply higher, only to give it all back.
Japan’s Election Results Could Send Shockwaves Through US Bond Markets
The US yield curve may continue to steepen, driven by rising inflation expectations and increasing bond yields in Japan.
Inflation Expectations Surge After 2-Year Consolidation
Despite the S&P 500 maintaining stability above its 10-day exponential moving average, upcoming earnings season and rising inflation expectations could significantly increase market volatility. A bottoming in implied correlations, coinciding with earnings, historically signals potential market shifts, while inflationary pressures further complicate the outlook by likely pushing Treasury yields higher.
Inflation Expectations Rise Amid Fed Uncertainty
Markets saw subdued trading influenced by July options expiration, though long-term inflation expectations, reflected in rising CPI swaps, reached notable highs. Meta’s technical breakdown could indicate broader market vulnerabilities, especially given its key role in recent market strength.