Yesterday was a risk-friendly session for assets across the board, with regional bank and CRE worries spurring a flight-to-quality bid in bonds, while ‘goldilocks’ US data, constructive beginning of month-flows, bargain hunting post FOMC, and strong earnings out of Meta & Amazon propelled equities higher.

Beginning with rates, fixed income investors rushed to buy fixed income as a tail-edge against any possible further regional banking contagion, leading to a -10bp drop in long-end rates from the worst levels post FOMC. 30yr bond yields are now at the lowest levels in 2024 (4.06%), while 10yr yields are fast approaching trendline support of 3.80%.

Reports out of Japanese bank losses over US property saw some of the weakest regional banks fall 7% in early hours, and Deutsche Bank also increased its loss provisions in US CRE nearly 5x to around US$133mm. The creeping CRE time-bomb was something we had covered in our earlier SignalPlus 2024 Macro Outlook ( — so please be sure to check that out if you haven’t done so already!

On the other side, the US economy continues to levitate with ISM seeing an impressive beat thanks to a big jump in new orders (52.5 vs 47) and prices paid (52.9 vs 45.2), with the former seeing the best performance since May 2022. Furthermore, Atlanta Fed’s GDPNow was upgraded from 4.2%(!) vs 3.0% for Q1, while weaker weekly claims data (Feb-payrolls) provided just the perfect mix of goldilocks data to rally both bonds and stocks across the board.

Ahead of NFP, the street is biased to a positive surprise on today’s print, with Citi noting a string of very low weekly claims in January to provide an upside boost. Wages are also likely to run above the 2% inflation target, though both are unlikely to be huge market movers without a very material beat on the upside.

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