1. Not QE But Similar
The U.S. Treasury just announced that it will be increasing its long-term bond buying.
More specifically, it said it will be buying 10-year, 20-year and 30-year bonds. It goes into effect on September 9 and goes until November 4, when it will be revised.
This is a big announcement. It’s not technically QE, but it tries to do the same thing.
Basic idea: the U.S. government is going to issue a lot of short-term debt to buy long-term debt, in hopes of bringing yields down.
Is this a sign of the government panicking? Likely.
2. Yields Are Already Reacting
Yields are reacting a little bit.
10-year yields are down to 4.65% — yesterday, they were around 4.73%. But, remain in an uptrend.
30-year yields are down to 5.19% — yesterday, they were at 5.3%. Also, continues to trend upwards.
The U.S. dollar is reacting a bit too, with the Dollar Index (DXY) around 99 and below its 200-day moving average.
And, a decent rally for the Japanese yen too…in case you are still following that story.
3. Gold Is Breaking Higher — But It’s Still Fragile
Gold is seeing a decent move to the upside, with the price breaking above the recent highs.
However, it’s still very early. It still hasn’t crossed above that 200-day moving average and continues to find resistance.
The yellow precious metal continues to look like a decent tactical long (not a recommendation), but it’s still fragile. In case of a broad market sell-off and some sort of liquidity event, gold comes down hard.
4. Falling Yields = Great for Stocks, Right?
Falling yields are great for stocks, right?
Technically speaking, the U.S. government is trying to lower rates, which could be taken as great for stocks. But be careful.
The problems underneath remain. Valuations are extremely high. The economy seems to be rolling over. Optimism/euphoria remains.
The wisest thing would be to trade the direction but also be extremely frugal with stops.
All the stars are lining up for disappointment.
5. TACO, Tariffs & Canada
Trump TACO’d on 50% tariffs on Canada for three days, citing that there’s a deal.
PM Carney says more work needs to be done, not confirming there’s a deal.
Remember: the tariff situation will eventually be figured out. But it’s the uncertainty and noise around it that causes panic and pessimism.
Overall, though, the Canadian economy seems to be stabilizing. Or, maybe its just higher oil prices giving an illusion that things are improving?