By Michael Every of Rabobank

The RBNZ hiked by 50bps not 25bps yesterday, but the slip in the US ISM services survey had the market once again screaming ‘Pivot!” Recall the March data we are now seeing was impacted by the recent banking crisis, which appears to have settled down to some degree. Central banks will likely want to wait and see.

Relatedly, Timiraos at the Wall Street Journal underlines that big short-end Treasury buying is also due to the shift out low-interest US bank current accounts into higher interest Money Market Funds (MMFs). The problem is that 40% of MMFs are going into the Fed’s reverse repo facility. A representative for US banks yesterday said this is resolved with more Fed rate cuts, in the same way two-year olds say this is solved with more chocolate. Far less sweet is a market call that the outlook for commercial real estate is now worse than during the GFC(!)

The geopolitical stage was also far from sugary:

‘Fragmenting Foreign Direct Investment Hits Emerging Economies Hardest’ attacks friendshoring and FDI flowing between geopolitical allies. The Fund says this increases the risks of an economic downturn, and models global GDP being cut by 2% if it continues. They are clearly wrong: this hits China hardest, while other emerging economies can’t keep up with the potential redirected FDI.

‘Geopolitics and Fragmentation Emerge as Serious Financial Stability Threats’ says, “Supervisors, regulators, and financial institutions should be aware of the risks to financial stability stemming from a potential rise in geopolitical tensions and commit to identify, quantify, manage, and mitigate these threats…. policymakers should be aware that imposing financial restrictions for national security reasons could have unintended consequences for global macro-financial stability.” It backs strengthening crisis preparedness; global and regional safety nets, currency swaps, and fiscal mechanisms, and precautionary credit lines. But are those proposed regional safety nets and currency swaps in US dollars or other currencies?

That’s as China green lights foreign investors entering its $5 trillion swaps market for CNY debt, initially only for government bonds to try to stem capital outflows due to rate differentials with the US. Recall the echoes between high US rates in the last Cold War and this one, in order to suck capital out of the Eastern bloc and into the West.

Of course, I don’t expect much of the market to pay much attention to any of these trigger warnings. So, in a mid-Ramadan, post-Passover, pre-Easter, pre-Songkran holiday spirit --there will be no Global Daily tomorrow, or on Monday-- here’s a musical ode to what most of the market spends so very much of its time thinking about - not trigger, but Tigger warnings:

Oh, the wonderful thing about pivots; Is pivots are wonderful things

They make market tops look like rubber; They make market bottoms have springs

They’re bouncy, trouncy, flouncy, pouncy; Fun, fun, fun, fun, fun

But the most wonderful thing about pivots is; There’s never only one!

Pivots are cuddly for sellers; Pivots are awfully sweet

Everyone el-us is jealous; That's why I repeat and repeat

The wonderful thing about pivots; Is pivots make us bear traps

They're loaded with vim and with vigour; They finance those dancers near laps

They're jumpy, bumpy, clumpy, thumpy; Fun, fun, fun, fun, fun

But the most wonderful thing about pivots; Is there’s never only one!

Never only —

Ouch!