YouSaid · the spoken record

Nick Givanovic

lines on the record: 86
first: 2024-05-16
most recent: 2024-05-16
sittings or episodes: 1
sources: podcast

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“Ristol's is where I publish my videos. I do a video every week about what I am expecting for next week and for all the various asset classes, the levels I'd like to trade and why, again. While in Charity Hedge Fund, where they get those videos as well, I actually tweet each and every day and say, yep, do it now, do it, do this, do that. I've changed my mind, et cetera, et cetera. So that's a much more active hedge fund type trading style. While the video, the risk styles gives you a whole bunch of models and indicators and gives you allocation models which change over time. and also the videos that I do every Sunday.”
2024-05-16 · Forward Guidance · Nick Givanovic: Treasury Bonds Are “Historically Unattractive” To Leveraged Investors · IDENTIFIED FROM THE TRANSCRIPT
“Volatility is very low, and we've put the money into a floating rate note, which gives you 535 and also has the potential to get you higher yields. Should the Fed ever decide that current monetary policy is actually not restrictive? So we do these rebalancings of the portfolio, trying to make a little bit extra than you would if you were in cash. It's basically as simple as that. As I said, a widow's and orphans kind of approach.”
2024-05-16 · Forward Guidance · Nick Givanovic: Treasury Bonds Are “Historically Unattractive” To Leveraged Investors · IDENTIFIED FROM THE TRANSCRIPT
“GameStop, yes. So we're not trying, it's not a hedge fund, we're not trying to make a lot of money. We're trying to make a reasonable return that a person can live off comfortably if you have one, two, three million dollars invested that you'd like to invest in the market and basically swap it around when invest in equities, when the risk reward is good, get out of it when it's not so good and maybe be overweight in cash. Everything that we've been discussing, you know, sort of we've been discussing, is it better to be long of equities or belong of cash at 535? Well, it's, you know, we agreed it's not so easy. It's not such an easy decision at this level. So what we've done, we've moved out of equities, we've bought cools because”
2024-05-16 · Forward Guidance · Nick Givanovic: Treasury Bonds Are “Historically Unattractive” To Leveraged Investors · IDENTIFIED FROM THE TRANSCRIPT
“But it's what we used to call in the UK a Widows and Orphans type of fund. We are not leveraged. We are very conservative. It's basically for people like us who are in their old age and would like their money to appreciate at something like seven, eight, nine, ten percent per year without much volatility. In fact, with as little volatility as possible and certainly far less volatility than if you were in a 64-day allocation equities against bonds.”
2024-05-16 · Forward Guidance · Nick Givanovic: Treasury Bonds Are “Historically Unattractive” To Leveraged Investors · IDENTIFIED FROM THE TRANSCRIPT
“Is where I tell my subscribers each and every day how I'm thinking, what I'm thinking, the levels that I would like to trade, why those levels. I do a lot of option trading in the bond market. I do some option trading in indices and stuff like that. But I basically try to explain my train of thought and why I think certain levels will trade over the course of time. Two gray beards, as you said, is where we run a real money account and we reallocate money from equities to bonds to precious metals, all assets basically apart from crypto. The only reason why we don't do crypto is because we are old, we are two gray beards, and we know nothing at all about crypto. And we'd rather not have money in something that we don't think we have an edge.”
2024-05-16 · Forward Guidance · Nick Givanovic: Treasury Bonds Are “Historically Unattractive” To Leveraged Investors · IDENTIFIED FROM THE TRANSCRIPT
“It's incredible that these things are still happening. And to me, there's yet another indication that policy is just not tight, even if PAL says it is, and that at some stage the bond vigilantes have to make a comeback. I'm sure that it's not anytime soon. But if things don't change and the economic numbers don't turn the way I've described at some stage, you know, duration gets sold and sold hard. And that's the time that you have to be worried about equities.”
2024-05-16 · Forward Guidance · Nick Givanovic: Treasury Bonds Are “Historically Unattractive” To Leveraged Investors · IDENTIFIED FROM THE TRANSCRIPT
“Is there a natural ceiling to a price, an equity price? No. It can trade at 200 tomorrow. It's impossible to tell how far demand can push it and how thin it is. I mean, it's trading 120 million shares today. I mean, that's, and we are at, what, midday? Still halfway through the day. So it could be trading. Quarter of a billion, you know, 250 million shares by the end of the day. The incredible volumes, especially for a stock that's trading at 50, I mean he was trading far less than that when he was trading at 15, right? I mean, in terms of volume.”
2024-05-16 · Forward Guidance · Nick Givanovic: Treasury Bonds Are “Historically Unattractive” To Leveraged Investors · IDENTIFIED FROM THE TRANSCRIPT
“So, trees then go to the sky, and certainly if I was the managing director or CEO, whatever of GameStop, I'd be on the phone to my investment bank and saying, how quickly can we put together an offering? And how large can it be? And can we have one in reserve just in case they absorb this one and posing all sorts of questions like that? Because these are unprofitable companies that are burning cash and therefore they need more and more funding and equity funding is free. So, you know, they're not going to issue bonds. They're going to issue equity.”
2024-05-16 · Forward Guidance · Nick Givanovic: Treasury Bonds Are “Historically Unattractive” To Leveraged Investors · IDENTIFIED FROM THE TRANSCRIPT
“And therefore they've rewritten the algos to fight the moves far later, and probably even help the move initially to get people trapped at much higher levels. Now, we all know that at some stage, or we all should know, that at some stage GameStop is going to come out with a rights issue and the supply will be there. And if that supply is not enough, they'll issue more and more and more until it is enough. So it's only a question of where the top is. It's not a question of if we're going to get the top.”
2024-05-16 · Forward Guidance · Nick Givanovic: Treasury Bonds Are “Historically Unattractive” To Leveraged Investors · IDENTIFIED FROM THE TRANSCRIPT
“What comes to mind is the conclusion that monetary conditions are probably not tight enough if this kind of thing can happen. But I think the high level point that I'd like to make is that The algos have probably been rewritten for this scenario. I think that people anticipated market makers rather, let's call them citadel or whoever or Ken himself anticipated that at some stage this would happen again There's always an again, isn't there? It's happening again.”
2024-05-16 · Forward Guidance · Nick Givanovic: Treasury Bonds Are “Historically Unattractive” To Leveraged Investors · IDENTIFIED FROM THE TRANSCRIPT
“Because they say, Oh, you're going to cut. Well, we've got other ideas. But, you know, that would only happen if inflation stayed sticky or we had even a surprise re-acceleration in inflation and still the Fed cut. So, you know, come up with that kind of scenario. Say you get this 4.2, 4.3 unemployment and all of a sudden the Fed cuts because it's looking for excuses. It cuts 25 basis points. And the next CPI print for whatever reason is high. Well, what happens then? Then you really get a steepening of the yield curve.”
2024-05-16 · Forward Guidance · Nick Givanovic: Treasury Bonds Are “Historically Unattractive” To Leveraged Investors · IDENTIFIED FROM THE TRANSCRIPT
“During his press, so if you go and listen to the last presser, he said, well, if the employment rate goes up, but I'm not talking about a 0.1, 0.2, I'm talking more than that. So more than that is 4.2. So, you know, we can take it literally. You don't have to take it literally, of course. that sort of unemployment rate would give him the excuse to cut. And again, he is looking for excuses, I believe. That is when actually the bond vigilantes could start coming in and really steepening the curve.”
2024-05-16 · Forward Guidance · Nick Givanovic: Treasury Bonds Are “Historically Unattractive” To Leveraged Investors · IDENTIFIED FROM THE TRANSCRIPT
“But I do think that there is a big reinvestment risk because when it happens, it's going to be fast, i.e. when the data changes, it's going to change fast. And therefore I have to have some money in tips. I have to have some money in cash, but I also have to be prepared to very quickly flip out of equities when that happens. Just that I'm not seeing that happening at the moment and until I sit I am prepared to give equities the benefit of the doubt.”
2024-05-16 · Forward Guidance · Nick Givanovic: Treasury Bonds Are “Historically Unattractive” To Leveraged Investors · IDENTIFIED FROM THE TRANSCRIPT
“So, and I'm talking indices, of course, stock indices. My allocation, I am long of equities. I have no bonds. I have some tips simply because a 2% real yield with a 3% sticky Sticky inflation rate CPI Yields you around 5%. Either via a coupon payment, but it won't be via the coupon, but via the nominal increase in the value of your bond. And that is much more than you can get on a tenure note, on a fixed income. So until the data changes, I think tips are preferable to nominal bonds. I think that equities are preferable to nominal bonds. I am not sure how much either is preferable to cash. I just don't know how long this hiatus this five point three percent will last.”
2024-05-16 · Forward Guidance · Nick Givanovic: Treasury Bonds Are “Historically Unattractive” To Leveraged Investors · IDENTIFIED FROM THE TRANSCRIPT
“If that is the case, I can't see why you would, of course, everything has a ceiling. Nothing rose to the sky, but for the time being, while the data that we are obtaining is the data that we are getting, and it's not changing and it's not suggesting that the opposite Investment strategy could be profitable. I'm just not willing to pick a top. I might get out of equities altogether and just being cash. So don't get me wrong, there is a very strong argument to be made that the best investment at the moment is cash. Very good argument indeed. Now the only question is if you put money in equities now, are you going to beat the 5.3 in hurdle in cash? It's a 50-50. It's by no means an assured outcome.”
2024-05-16 · Forward Guidance · Nick Givanovic: Treasury Bonds Are “Historically Unattractive” To Leveraged Investors · IDENTIFIED FROM THE TRANSCRIPT
“All the or most of the increase in earnings quarter by quarter have been met. So everything that the market was anticipating more or less came to be true and we all know about the famous Fitch Hook that you start with expectations out. There and you end up down here, but it has been in by no means a disaster like it used to be. In fact, earnings are very good. Pricing power is good. The companies are passing on all the price increases that they get at the PPI level onto the CPI level, let's say, let's call it that way. So the consumers are having to pay the higher prices. The profit margins are remaining constant to improving. If that is the case, I can't see a case for bonds over equities because one has a bad and deteriorating balance sheet while the other has a good and improving balance sheet.”
2024-05-16 · Forward Guidance · Nick Givanovic: Treasury Bonds Are “Historically Unattractive” To Leveraged Investors · IDENTIFIED FROM THE TRANSCRIPT
“Well, it's a relatively bullish view. I own no bonds and for the first time in twenty thirty years, I find the yields unattractive. And therefore, if I find that yields in bonds unattractive, you have to invest somewhere. I always try to think. How real money allocators think? And I would have guessed that they are thinking the same way as me. The balance sheet of the United States in general, i.e. of the United States Treasury, let's say, is in nowhere as good a shape as the balance sheet of AAA, AAA corporates. In which case why would I and the economic data that we've been getting is very strong, the economy is continuing at a very good clip.”
2024-05-16 · Forward Guidance · Nick Givanovic: Treasury Bonds Are “Historically Unattractive” To Leveraged Investors · IDENTIFIED FROM THE TRANSCRIPT
“ECB cutting. Also, the supply is in the US rather than in Europe. And yet, you know, bonds have done nothing. So yes, it is one of the examples that the moves in bonds in US treasuries have tended to make far less sense to me over the course of the past three weeks or even three months than they used to. So it's a funny period. Something is going on. I can't tell you what it is. The moves are... restricted and also Illogical in a way.”
2024-05-16 · Forward Guidance · Nick Givanovic: Treasury Bonds Are “Historically Unattractive” To Leveraged Investors · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I mean, today you did have mitigating factors like the revisions and also the fact that you've got the really important data tomorrow. So I can understand it. But you've had European rates just keep on going higher when we all know that The ECB would like to cut rates in June. And if I were a betting man, I would put on, I would put some money on them cutting in June. While I think the odds of the Fed cutting in June have to be worse than the odds of the...”
2024-05-16 · Forward Guidance · Nick Givanovic: Treasury Bonds Are “Historically Unattractive” To Leveraged Investors · IDENTIFIED FROM THE TRANSCRIPT
“Was basically setting the interest rate and not allowing long-term yields to find their own market level. That period hopefully is over, not to be repeated in the near future, I hope. And now the market has found a level that it's comfortable at for the time being until the economic story changes.”
2024-05-16 · Forward Guidance · Nick Givanovic: Treasury Bonds Are “Historically Unattractive” To Leveraged Investors · IDENTIFIED FROM THE TRANSCRIPT
“Yield movement. So what I'm trying to say is that volatility for the past several months has been actually relatively low. And if you look at the movie index is basically stuck at 100, which is the low end of the range since 2022. If you look at where the, I know they didn't work it out, but the move index back in the 80s and 90s would have been much higher than it is now. So it's only in the, since the great financial crisis and until the tightening in 2022, that the move index was substantially lower than it is now. To me, that is a period of monetary repression. It's a period where the Fed”
2024-05-16 · Forward Guidance · Nick Givanovic: Treasury Bonds Are “Historically Unattractive” To Leveraged Investors · IDENTIFIED FROM THE TRANSCRIPT
“Basis points are basis points, but if you have a look at where the 30, I mean, the 30 year has been really four and a half percent, what do you want to do for the past year? I mean Since November, it's been lower. It's been very slightly higher, but this has been the equilibrium price. So the market is priced in an unrealistic level and speed of cuts from the Fed. It got told by data and by the Fed that it's not going to happen. It has repriced and basically has remained there for the past two or three months. Is that It's the ability for now. But I think that when the, if I'm correct, the disinversion happens, the moves at the short end are going to make are going to be so large. They're going to be like 150, 200 basis points. And that is going to be something like 40%. I mean, in terms of...”
2024-05-16 · Forward Guidance · Nick Givanovic: Treasury Bonds Are “Historically Unattractive” To Leveraged Investors · IDENTIFIED FROM THE TRANSCRIPT
“Score it 60 basis point range. 60 basis point range in my day used to be like a week's trading range. But here we've been best part of five months in a 60 basis point range. And also they haven't really been all that logical. And the markets, you know, the bond market goes through these periods where it does things which are not hugely logical. And then all of a sudden it actually decides which way wants to go and just trends. So I'm really waiting for that. My positions are very light and I'm waiting for data to tell me which way this market really wants to go. Because if we keep on getting strong data like we've been getting, I think that by the end of the year You know, yields have long end yields long duration has to be probably significantly higher than it is now.”
2024-05-16 · Forward Guidance · Nick Givanovic: Treasury Bonds Are “Historically Unattractive” To Leveraged Investors · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, sell the 50 GameStops fradle at 100. Yeah, I find that kind of question difficult to answer because it's just too general. I just can't generalize like that. I think every market year has its own peculiarities just like this one does. This has been one of the hardest environments in bonds for me for the past, I don't know, 20 years or so. And simply because the moves are very small and they also tend in terms of yield, they're quite small. Basically, let's have a look. What have the 30 has been trading? The 30s since beginning of 24 have basically been in a 50.”
2024-05-16 · Forward Guidance · Nick Givanovic: Treasury Bonds Are “Historically Unattractive” To Leveraged Investors · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I would. I mean, I would bet that the Feznock, but I would be levered long because I think the odds of it going back towards 485 are much better than the odds of it going to 520. So if I'm risking 10 basis points to make 35, 40 basis points, I would much rather be levered long than be short puts, which are going to make me what? 6, 7, 8 basis points, whatever it is. Well, depends how long out, how far out you go, but I'd be much, much rather be levered long of the two years.”
2024-05-16 · Forward Guidance · Nick Givanovic: Treasury Bonds Are “Historically Unattractive” To Leveraged Investors · IDENTIFIED FROM THE TRANSCRIPT
“And as I said, a series of supporting data, not just one data point, but several data points which all point in the same direction. So here you have to be neutral and you have to be basically trading it. But at 510, I would have no hesitation in being levered long because the odds would be extremely good. It's as simple as that, I think.”
2024-05-16 · Forward Guidance · Nick Givanovic: Treasury Bonds Are “Historically Unattractive” To Leveraged Investors · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, over the course, I mean, you can work out whether two years should be trading according to what you think the Fed funds level is going to be over time. And you can work it out that way. But what I will tell you is that at 510, I would be long of it levered. I don't care. Why? Because I think it's the odds of it going up from there are extremely bad, low. And therefore, I would belong of it levered at 580, you know, at 484. I'm neutral because unless I get a piece of data which suggests that yes, the Fed now is getting more of the confidence that it needs to start the cutting. Cycle. I can only be neutral about it. The market got itself spanked in January and since. And I don't think it's going to go to those extremes again without supporting data.”
2024-05-16 · Forward Guidance · Nick Givanovic: Treasury Bonds Are “Historically Unattractive” To Leveraged Investors · IDENTIFIED FROM THE TRANSCRIPT
“I can tell you that actually I'm pretty neutral at four hundred eighty four. Why? Because we're already building in one and three quarter cuts, right?”
2024-05-16 · Forward Guidance · Nick Givanovic: Treasury Bonds Are “Historically Unattractive” To Leveraged Investors · IDENTIFIED FROM THE TRANSCRIPT
“That's that left side of the boat. So, Nick, we talked a lot about steepening. Relative to the long end of the yield curve, if you were bullish on the short end, that's what a steepening means. What about the short end just in general? Like if I were to ask you, do you like the two year on an unlevered basis? What would you say if I were to ask you, do you like the two year on a levered basis, i.e. borrowing at 5.3 to buy at wherever the two-year is 4.8 or whatever?”
2024-05-16 · Forward Guidance · Nick Givanovic: Treasury Bonds Are “Historically Unattractive” To Leveraged Investors · IDENTIFIED FROM THE TRANSCRIPT
“So the moves much larger than they are now by a factor of x. But I think that what is going to happen now is that the very short end is not going to wait for the Fed. Why? Because the Fed has already told you that they want to cut. And you saw this during the period from November when they pivoted in inverted commas. We anticipated at the very short end, what, six, seven cuts? And I think that that kind of market action is going to continue. Because when the Fed tells you that they want to cut and their bath to hiking is extremely high, then all you're looking is for the data that the Fed is going to use to justify doing what it is that they want to do. Therefore, now the market is going to anticipate the Fed at the short end and not follow the Fed.”
2024-05-16 · Forward Guidance · Nick Givanovic: Treasury Bonds Are “Historically Unattractive” To Leveraged Investors · IDENTIFIED FROM THE TRANSCRIPT
“The October crash in 1987 because rates were very, I mean, I think I'm right in saying that although the Fed funds rate never got anywhere near double figures, the two-year note actually got to double figures. So, because they were really the bond market will fly higher or used to fly higher. Because then forget, this was a period after this was the Volcker period, when there was no pissing around with 25 basis points. It was like, let's go, boys, one way or the other.”
2024-05-16 · Forward Guidance · Nick Givanovic: Treasury Bonds Are “Historically Unattractive” To Leveraged Investors · IDENTIFIED FROM THE TRANSCRIPT
“I mean, the market has changed a lot over the years. If you take something like the period from 85 to 86, when the Fed was cutting rates, I think I'm right. And if my memory serves me well, I can't say that I remember every single price that traded five and 86. I don't think the two-year note ever really fell below Fed funds rates. As the Fed was cutting rates, it would fall with the Fed. So, you know, exactly what you've said. But the other way, for example, 1987, when the Fed was hiking rates throughout until October of 1987, the two-year note, if I'm not mistaken, and I'm taking a guess here, could have Been trading something like $150 to 200 basis points over Fed funds, always far anticipating what the Fed would do in the future. Far anticipating it. And that is probably what actually caused the”
2024-05-16 · Forward Guidance · Nick Givanovic: Treasury Bonds Are “Historically Unattractive” To Leveraged Investors · IDENTIFIED FROM THE TRANSCRIPT
“Sharply, all kinds of data would have to show the same path. And so far, I think you'll agree that none of them are showing that that is the path that we're following.”
2024-05-16 · Forward Guidance · Nick Givanovic: Treasury Bonds Are “Historically Unattractive” To Leveraged Investors · IDENTIFIED FROM THE TRANSCRIPT
“As opposed to zero growth, because the difference, as I said, between zero and minus one is tiny. So if the market now starts discounting that we're going to go into recession, but for that, you have to have a continuation of data that supports that theory. We haven't even got one piece of data that will support that theory. We can have as many pieces of data which say that growth isn't going to be three and a half to four and a half, but it's going to be two and a half to three and a half. But we've got zero data that says that it's going to be below two and a half percent. You know, all sorts of data would manifest themselves from retail sales falling sharply to unemployment claims, weekly unemployment claims rising sharply to the non-farm payrolls.”
2024-05-16 · Forward Guidance · Nick Givanovic: Treasury Bonds Are “Historically Unattractive” To Leveraged Investors · IDENTIFIED FROM THE TRANSCRIPT
“Well, the bull steepener, as I said, would occur much faster. Now what are the odds are? Well, that's the same as asking me what are the odds of the stock market correct in 10, 20%. Because I can't see a risk-off move that doesn't take stocks down at least 10%. I mean, let's face it, the risk-off move would be happening because the market is discounted much lower growth, therefore the possibility, if not the probability of a recession,”
2024-05-16 · Forward Guidance · Nick Givanovic: Treasury Bonds Are “Historically Unattractive” To Leveraged Investors · IDENTIFIED FROM THE TRANSCRIPT
“Where did they find this bunch of money? They found two trillion under the bed, which was going to be the donations. Yeah. I think that as I always say, anything is possible, but everything has a probability attached to it. I think that scenario has an extremely low probability attached to it. All the reasons that I've mentioned, the issuance is huge. Nobody's got the balance sheet to buy all this. Why would anybody, if inflation stays where it is and also growth stays where it is, why would anybody all of a sudden be buying bonds at two and a half percentage point below here? I just don't see the reason for it. It's extremely low odds. That's all I'm saying. Now, can the Yilka just meander around here for another six months? Easy.”
2024-05-16 · Forward Guidance · Nick Givanovic: Treasury Bonds Are “Historically Unattractive” To Leveraged Investors · IDENTIFIED FROM THE TRANSCRIPT
“About the other possibility in a year short term, the Fed fundrais is also 5.3% or 5.25% to 5.5% range, but the 10 year is 100 basis points lower just because people are rightly or wrongly pricing in a recession or the people who buy bonds, they just found a bunch of money or they print, you know, they...”
2024-05-16 · Forward Guidance · Nick Givanovic: Treasury Bonds Are “Historically Unattractive” To Leveraged Investors · IDENTIFIED FROM THE TRANSCRIPT
“I am really struggling to think of it. It's all a question of degree. So if we have a look at whether Jelka, I mean, the 2's 10 stopped out at just about just over 1% inversion. And now there are 36 basis points of inversion. So what would it take for us to go back up to 1% of inversion? I don't know. I mean, it would have to be tightening by the Federal Reserve. The only thing that would make long duration bonds happy is for pow to wake up one morning and say, sorry boys, everything I've been telling you for a year is absolute bollocks. Policy has not been restrictive at all. In fact, it's loose. And I'm hiking rates to 7.5%. Yes. Would make the yield curve much more negative than it is at the moment. But then you have to start thinking, well, what are the odds of that happening? I think the odds are very, very low indeed.”
2024-05-16 · Forward Guidance · Nick Givanovic: Treasury Bonds Are “Historically Unattractive” To Leveraged Investors · IDENTIFIED FROM THE TRANSCRIPT
“So you say you can't see an alternative to a bull steeper or a bear steepener, but it's not impossible that in a year from now, the yield curve was still in inverted. What would that scenario be like?”
2024-05-16 · Forward Guidance · Nick Givanovic: Treasury Bonds Are “Historically Unattractive” To Leveraged Investors · IDENTIFIED FROM THE TRANSCRIPT
“then that is precisely what is likely to happen. You're going to have. A massive move of real money into the equity market and out of the bond market. And then you get this bear steepening. Especially coupled with the fact that AIDS and election year and powell has told you that he doesn't want to hike. And you have monetary policy, which is not tight, opposite of what he's saying, then you get a spike in equity prices. So Having being long of equities and short of long duration and long of short duration, To me is the best of all worlds because one of these is going to work, right? It's going to be one way or another. And I can't see an alternative to this scenario.”
2024-05-16 · Forward Guidance · Nick Givanovic: Treasury Bonds Are “Historically Unattractive” To Leveraged Investors · IDENTIFIED FROM THE TRANSCRIPT
“Or the lag ends. Now whether the lag takes eighteen months, two years, three years, I have no idea and I can't tell you, but at some stage this, and we are going to get the signal from the stock market, and again, we are not getting it at the moment. My bet would be that the odds are in favor of a bull steepening rather than a bear steepening. A bear steepening would actually mean that Powell and the Fed and all those PhDs are not correct, that policy is not restrictive enough. And then that couple with everything that I've been saying so far about the supplier bonds. Coupled with the fact that nobody can possibly, if monetary policy is not restrictive, why would you buy bonds as opposed to equities? No reason whatsoever, right”
2024-05-16 · Forward Guidance · Nick Givanovic: Treasury Bonds Are “Historically Unattractive” To Leveraged Investors · IDENTIFIED FROM THE TRANSCRIPT
“How is saying and what the Fed is saying is correct? And that is that current monetary policy is restricted. Because if current monetary policy is restrictive, at some stage that lag between the monetary policy being implemented and it working, it has to stop, right? At some stage, either monetary policy is not restrictive enough.”
2024-05-16 · Forward Guidance · Nick Givanovic: Treasury Bonds Are “Historically Unattractive” To Leveraged Investors · IDENTIFIED FROM THE TRANSCRIPT
“All I know is that bull steepenings are much faster when they happen. Why? Because a of the massive reinvestment risk, if you think about how many trillions of dollars are in money market funds. and B, the buyers when they come in for the two year and the three-year note are not that yield sensitive. Two, three, four, five basis points to them means nothing. So when they come in, it's just an avalanche. And yields can fall very, very quickly. So while I can't answer your question, I can give you my probabilities. I think it's far more likely to be a bull steepening than a bear steepening if what”
2024-05-16 · Forward Guidance · Nick Givanovic: Treasury Bonds Are “Historically Unattractive” To Leveraged Investors · IDENTIFIED FROM THE TRANSCRIPT
“So bull steepening is when short term interest rates fall by more than long term interest rates and bear steepening is when long term interest rates go up by more than short-term interest rates. Do you have a view on if and when there is a steepening the likelihood of that it is a bull steepening versus a bear steepening?”
2024-05-16 · Forward Guidance · Nick Givanovic: Treasury Bonds Are “Historically Unattractive” To Leveraged Investors · IDENTIFIED FROM THE TRANSCRIPT
“But the difference between 0.5 and negative is not that huge, and then people naturally extrapolate. And they go overboard the other way. So when those odds change and the stock market will tell us when those odds are changing, they're not at the moment, right? The stock market is as stable as stable can be at very high levels, then that will happen and you will see that disinversion of the yield curve. It's not happening yet. I don't foresee that it's going to happen in the absolute foreseeable future, but at some stage during the course of this year, I think it's... It just has to happen one way or another via bull steepening or a bear steepening, but one way or another, the forces that I've described to you are working in the background. At some stage, it just has to happen.”
2024-05-16 · Forward Guidance · Nick Givanovic: Treasury Bonds Are “Historically Unattractive” To Leveraged Investors · IDENTIFIED FROM THE TRANSCRIPT
“And that can happen very, very quickly. I've seen it happen in a matter of two or three weeks. You can have a massive move in the two and three year notes while far less in the 10 year, far, far less. I mean, the 10-year could even, because of all the curve trades which will be put on, the 10-year could even go the other way. When it happens, these inversions are normally a sign of recession or traditionally they have to be. Or let's say a weakening of the economy. Or to put it precisely, a change in the Probabilities that the market assigned to growth. So all of a sudden you go from a 60-70% probability of 3% growth to a 60-70 probability of zero growth. or”
2024-05-16 · Forward Guidance · Nick Givanovic: Treasury Bonds Are “Historically Unattractive” To Leveraged Investors · IDENTIFIED FROM THE TRANSCRIPT
“Forget about a thing which is called reinvestment risk. You have a whole load of people who are in bills because they're either money market funds or let's say that retail saw that 525, 535 in bills is very attractive and they're staying in bills. But at the first sign of the economy weakening you're going to have a massive move in the short duration because of the anticipation of the reinvestment that those people need to do because you might have been getting 535 for three months but then the Fed cuts 50 basis points where's where's your next reinvestment? So you will get a whole Whole load of people switching from the very, very short end into two year three year and so on.”
2024-05-16 · Forward Guidance · Nick Givanovic: Treasury Bonds Are “Historically Unattractive” To Leveraged Investors · IDENTIFIED FROM THE TRANSCRIPT
“Very interesting. So, I think of the bond market as kind of a boat. And if you're saying the pressure for interest rate cuts is on the left side of the boat. And if everyone's worried about a recession and a growth is going to slow down, that's a lot of pressure on forward expectations of the market, the Fed to cut rates. So the two-year would be low. Now, there's not that much recession worry relative to, you know. a year ago or even six months ago. But what you're saying is that Even though the pressure on the left side of the boat isn't that high, the pressure on the right side of the boat is extremely light because JPAL pretty much said very unlikely that we're going to hike rates. So there's much less pressure on the left side of the boat, i.e. cuts, but there's extremely lack of amount of pressure on the right side of the boat for hikes. So all in all, the two year is being pulled to the left side, i.e. interest rates down.”
2024-05-16 · Forward Guidance · Nick Givanovic: Treasury Bonds Are “Historically Unattractive” To Leveraged Investors · IDENTIFIED FROM THE TRANSCRIPT
“375 4%. Then the two-year node can trade on the four ten, and the 10-year can actually stay where it is or come down very little. It's now 4.5, 448, it can come down to 430 and then start going up. But in any case, the yield curve would steepen all in all. Two-year notes would appreciate much more than the longer duration. A positive yield curve is the natural state of things. So I think at some stage that has to happen, whether it takes another three months or whether it takes another six months, I think in that kind of timeframe, it almost has to happen.”
2024-05-16 · Forward Guidance · Nick Givanovic: Treasury Bonds Are “Historically Unattractive” To Leveraged Investors · IDENTIFIED FROM THE TRANSCRIPT
“We have no ceiling for duration. Duration is going to be bid just like we have no floor, theoretical floor for duration. We don't have a theoretical ceiling for duration either. And therefore, I think the yield curve is going to steepen one way or the other, whether it's by the two-year node going up towards 510 and then the rest of the curve slowly catching up towards 510 or the other way around which would be a bull steepening which would be a An economy which all of a sudden starts substantially weakening also inflation going down towards 2% target and then the Fed can do what it says it's going to do in its stop plots and that is cut rates about five times in all between 2024 and 2025 bring rates short rates down to let's call it”
2024-05-16 · Forward Guidance · Nick Givanovic: Treasury Bonds Are “Historically Unattractive” To Leveraged Investors · IDENTIFIED FROM THE TRANSCRIPT