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Inflation Risks Start to Hit Pockets of Global Bond Market

Inflation Risks Start to Hit Pockets of Global Bond Market

(Bloomberg) — Parts of bond markets around the world have started to signal that inflation risks will linger in the longer term, even as few expect prices to jump right away.

Unprecedented stimulus to cushion the global economy from the pandemic and signs that central bank independence is eroding worldwide have kept inflation concerns alive. That’s showing up as one factor in credit markets, where longer-dated bonds that are more sensitive to inflation expectations have lagged in recent months, reversing earlier outperformance.



Tough Days


© Bloomberg
Tough Days

In the U.S., investment-grade corporate notes due in more than 10 years underperformed short bonds last month after posting the most losses among all maturities in August, according to Bloomberg Barclays indexes. And in the options market, the cost to hedge against inflation rising over 2% in the next five years has more than doubled since February. In Asia, dollar-denominated company securities with over 10 years to maturity were the worst-performing group for the two months through September.

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Read about study that found signs of eroding central bank independence

That’s even though the sustained economic recovery that was going to usher in a new age of rising prices no longer looks like a sure thing as the pandemic drags on. Some popular trades betting on inflation that had done well over the summer have started to come undone, with growth stocks dropping and gold’s rally faltering. But for credit investors looking further along the horizon, a growing group sees eventual economic recovery gradually rekindling price increases.

“We think the worst of prices declines are over — some of the coronavirus shock-related disruption now has eased as economies start to reopen,” said Sylvia Sheng, global multi-asset strategist at JPMorgan Asset Management, who expects a risk of high inflation in the next three to

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Stock-market bets against Nasdaq index hit decade peak

Stock-market bets against Nasdaq index hit decade peak

The technology-laden Nasdaq Composite Index stands less than 2% from its early September peak, as of late Tuesday trade, reflecting its resurgence from its jaunt into correction territory less than a month ago.

However, rather than betting on continued progress in the popular benchmark that has led the run-up from coronavirus-induced lows, investors are mounting bets that the benchmark continues to be overpriced and faces a fresh collapse in the near-term.

“Somebody, somewhere, still wants to bet against this market,” writes Jason Goepfert, head of SentimenTrader and founder of independent investment research firm Sundial Capital Research, in a Tuesday research note.

Goepfert writes that so-called short interest, or the total number of shares of a particular stock or fund that have been sold short by investors, but haven’t yet been covered or closed out, on stocks trading on the Nasdaq Composite
COMP,
-0.10%

rose in the last two weeks of September to around the highest level in 10 years, at around 9.7 billion shares (see chart below expressed as a percentage below a chart of the Nasdaq Composite’s absolute value).


Jason Goepfert at SentimenTrader

Of note, Goepfert said some investors view rising short interest as a contrarian sign, one that may signal a bullish trend for the benchmark market, since it also reflects a potential snapback trade for stocks if bearish investors suddenly are forced to unwind their short bets and buyback stocks they have borrowed in their short bets.

However, the SentimenTrader analyst says investors willing to dismiss the current rise in short-term interest, or view it as a potential cause for buying and not caution, do so at their own peril.

As the stock market has surged higher in the aftermath of its swoon back in March, amid the peak of selling precipitated by worries about the economic

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Citigroup profit hit by consumer bank woes; warns of more pain

Citigroup profit hit by consumer bank woes; warns of more pain

By Imani Moise and Niket Nishant

(Reuters) – Citigroup Inc beat analysts’ estimates for third-quarter profit on Tuesday, driven largely by a surge in trading, but its results underscored deeper troubles in its consumer bank that struggled with a decline in customers and spending.

The bank, which will have Wall Street’s first woman CEO, Jane Fraser, at its helm early next year after long-time Chief Executive Michael Corbat retires, faces a series of challenges as a coronavirus-induced recession grips American households.

Citi’s shares fell over 4% in early trade as management on a conference call indicated that the third-largest U.S. lender was bracing for prolonged pain, a view that contrasted with JPMorgan Chase Inc’s more upbeat views on loan losses.

“We are expecting a somewhat more muted and slower recovery in both unemployment and GDP through 2022,” said Chief Financial Officer Mark Mason.

“In the crisis we are managing through, we’re not seeing acquisitions or new account openings.”

With the recession crushing consumer and business confidence, and with it demand for loans, Citi reported its first outright fall in revenue this year, down 7% to $17.3 billion in the third quarter.

Profit tumbled by more than a third as its credit card customers closed accounts and spent less.

Revenue in North American branded cards, the growth engine for Citi’s consumer bank going into the year, fell 12%.

The bank, one of the largest credit card issuers globally, said end of period open accounts across its portfolio dropped by 4%, or more than 5 million, and purchase sales slid 10%.

BRIGHT SPOTS

There were, however, some bright spots.

Citi’s trading business turned in another strong quarter, with revenue from bond and stock market trading jumping 18% and 15%, respectively.

Credit costs were helped in part by lower loan volumes, particularly in

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Desperate Americans hit by pandemic beg Congress, Trump to pass economic relief bill

Desperate Americans hit by pandemic beg Congress, Trump to pass economic relief bill

(Reuters) – Sylvia Padilla spent last Thursday checking food pantries in Lubbock, Texas for groceries to feed herself, her daughter and three-year-old grandson.

Sylvia Padilla poses for a photo outside St. John’s United Methodist Church in Lubbock, Texas, U.S. on October 8, 2020. REUTERS/Brad Brooks

Some places were closed, others had nothing available. Outside the shuttered St. John’s United Methodist Church, Padilla, 50, recounted her struggle to survive during the economic disaster that the novel coronavirus pandemic had dumped upon her, choking words out through tears of fear and frustration.

“This is like a nightmare I can’t wake up from,” Padilla said, resting her face in her hands. “It really feels like a nightmare, but it’s our reality.”

Like many Americans, Padilla is barely getting by and says she desperately needs government help. She received a $1,200 check in April from the Coronavirus Aid, Relief and Economic Security Act passed by the U.S. Congress and signed by President Donald Trump on March 27.

The check helped her pay back rent she owed and she and others are hoping that lawmakers and the Trump administration can reach accord soon on another relief package after months of disagreements.

“We’ve got some potatoes and beans at home. A bit of flour for tortillas. We’re just trying to make that stretch,” said Padilla, whose business selling food to construction workers ended with the pandemic and her daughter last month lost her job in retail sales.

“A new stimulus check would really mean the world to me right now.”

After March’s shutdowns to curb the spread of the virus, unemployment in the United States shot to levels here not seen since the Great Depression. Many jobs returned as parts of the economy reopened, and consumer spending rebounded, thanks in part to the $2.2 trillion stimulus

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Desperate Americans Hit by Pandemic Beg Congress, Trump to Pass Economic Relief Bill | Investing News

Desperate Americans Hit by Pandemic Beg Congress, Trump to Pass Economic Relief Bill | Investing News

By Brad Brooks, Mimi Dwyer and Rich McKay

(Reuters) – Sylvia Padilla spent last Thursday checking food pantries in Lubbock, Texas for groceries to feed herself, her daughter and three-year-old grandson.

Some places were closed, others had nothing available. Outside the shuttered St. John’s United Methodist Church, Padilla, 50, recounted her struggle to survive during the economic disaster that the novel coronavirus pandemic had dumped upon her, choking words out through tears of fear and frustration.

“This is like a nightmare I can’t wake up from,” Padilla said, resting her face in her hands. “It really feels like a nightmare, but it’s our reality.”

Like many Americans, Padilla is barely getting by and says she desperately needs government help. She received a $1,200 check in April from the Coronavirus Aid, Relief and Economic Security Act passed by the U.S. Congress and signed by President Donald Trump on March 27.

The check helped her pay back rent she owed and she and others are hoping that lawmakers and the Trump administration can reach accord soon on another relief package after months of disagreements.

“We’ve got some potatoes and beans at home. A bit of flour for tortillas. We’re just trying to make that stretch,” said Padilla, whose business selling food to construction workers ended with the pandemic and her daughter last month lost her job in retail sales.

“A new stimulus check would really mean the world to me right now.”

After March’s shutdowns to curb the spread of the virus, unemployment in the United States shot to levels https://www.reuters.com/article/us-usa-economy/coronavirus-deals-u-s-economy-great-depression-like-job-losses-high-unemployment-idUSKBN22K1NS not seen since the Great Depression. Many jobs returned as parts of the economy reopened, and consumer spending rebounded, thanks in part to the $2.2 trillion stimulus bill.

Now that cash, paid directly to individual Americans and small businesses to pay

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