The past week events:

  • I was impressed by Easy Ben gang. This time they came with a statement pretty hawkish on inflation, but managed to please the bulls as well with dovish rate bias. The most important for them is to not unwind the carry trade now – and carry trade is alive and kicking
  • KB Home posted better than expected 84% profit drop. And that is one of the best builders
  • There are early indications that consumers are scaling back sharply in March. If confirmed, it will be a huge bump
  • Existing home sales were pretty good, but this is a weather skewed trailing indicator
  • Japan posted its first increase in property prices in 16 years. Carry trade will not collapse, but it will slowly decline

What to watch next week:

  • Corporate junk bond market deterioration is the next milestone of my recession call. The junk bond index is yielding 8.18% now, about 25bp above the level of just two weeks ago. I’m looking for this index to drift by another 5bp every week
  • I’m also watching the CDX.NA.HY credit default swap index. It fell back to late December levels and I don’t expect it to recover
  • New home sales will come below consensus
  • Construction spending will be down
  • Watch any news related to retailers – there is a concern that consumer is slowing down
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