The Bond Market Pain Isn't Over | Weekly Roundup

Quinn (0:00)

Welcome to Token2049.

Felix (0:02)

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Nothing said on Forward Guidance is a recommendation to buy or sell any investments or products.

DCP (0:57)

I think I'm going to ask ChatGPT to tell me where the S&P and the Q and the Nasdaq should be without the Mag 7

Felix (1:06)

Right. Yeah.

Okay. I just hit record because we just started ripping right away, and it was just like too good not to, and I didn't want to stop the flow. But we're back. We're recording Forward Guidance Roundup Edition. We got DCP in the house, who's a legend. You're on, I think it was almost like 2024 You came alongside with our mutual friend, David Cervantes. Yes. And that was a ton of fun. I got a bit of your backs for you, but for those that don't know, DCP has been in the trenches of fixed income and stir trading and your dollars for, I think, longer than I've been alive.

DCP (1:46)

I started on the floor the summer of 1983

Felix (1:51)

I think Quinn and I have both been alive. So there you go.

DCP (1:54)

And I was just a kid in a cheap polyester pair of pants and a shitty pair of shoes and a tie, trying to figure out if I could afford to get enough train fare to get back and forth to work at the time.

Quinn (2:07)

Well, it's a good thing we brought in the big guns for this, because I know Felix and I are scratching our heads when we're watching the 30-year shoot up 10 bips every day and nothing happening. It seems like just waiting on the next taco. We figured- Exactly.

Felix (2:23)

We got to talk to people who have seen a 10-year above 5.2 before in their trading career. So it's great to have DCP on. Yeah. I mean, what the hell is going on with the bond market? Obviously, that's been the move and all the actions there right now.

I mean, just look at where we closed. 5.22 on the 10-year.

DCP (2:41)

Yep. If you take a look at ZB in the last two and a half months, it's down almost 10 full big boy points, which is truly amazing considering they were pricing in some cuts prior to that.

Quinn (3:02)

Doesn't it just make that February 27th pop in bonds or bottom in yields just look crazy on the doorstep of the Iran war? I know you've been tweeting a lot about how so much really you can pinpoint it directly to that as the start of this.

I guess presumably if this was manmade, there's some way to end it. But what do you think happens from here? Where we're at, because so far, it's not affecting CROSSAS of all that much. Not yet.

DCP (3:38)

I would say I laid out some ground rules for what I think. I'm just going to try to pull them back up here real quick.

For me, I don't believe that this bond market and stir market can shift, can flip to a good, favorable long until we get some real stuff. What's the best way to say it? You would need the Fed signaling hikes are done. Not going to happen. You would need AI CapEx to slow. It's possible. Oracle's thrown a little bit of a curveball in there. Crack spreads rolling over. I think that's the real one. Material weakness in indices.

Does that really get us where we need to be and how big of a correction? And then you need to read a spike. Can we get jobs to be weird? The problem with jobs is we've reduced the participants available for the workforce that employers don't want to let people go. And so that number, if there's less and less people available to work, people are holding on to their employees as long as they possibly can, would already be in a recession, I think, before unemployment spikes. So I don't think that's a reasonable one. And then the taco sees pirate trade. But I think those are really the only things, as it stands right now, that could shift the sentiment away from the bearishness that we're looking at right now.