Short Squeezing Into Daylight Savings
November 03, 2023
As daylight savings time has us all “springing forward” an hour (except for a couple of weird states), it’s the perfect time to shed some light on the recent happenings in the financial world. Just like that extra hour of sleep, we’re all eagerly waiting for the bond market to catch a break, and while we can’t turn back time, we can certainly have a chuckle about it.
Here’s the scoop: inflation is behaving itself lately, which, let’s be honest, is about as likely as catching a unicorn on your morning jog. The Fed’s benchmark inflation measure is posting such modest increases that it’s practically napping in a hammock (insert Corona). On a three-month rate-of-change basis, it’s almost holding hands with the Fed’s 2% inflation target. Who knew inflation had such impeccable manners?
But what about the Fed? They’ve been on a bit of a pause lately, like someone who can’t decide whether to hit the snooze button or get up and face the day. They’ve left the Fed Funds Rate in the 5.25% to 5.50% range for two meetings in a row. It’s almost like they’re waiting for the perfect moment to make their grand entrance at the ball.
Oh, and let’s not forget the Bureau of Labor Statistics, who decided to throw a curveball similar to the Texas Rangers pitching staff! They reported 150,000 jobs created in October when we were all expecting a grand total of 180,000. It’s like they’re playing a game of “Guess the Job Numbers,” and they’re just as surprised as we are.
Meanwhile, speculators have built up a “historically massive” short position in U.S. Treasury futures. It’s almost as if they’re betting on the bond market the way people bet on whether the groundhog will see its shadow. Will yields climb when new Treasury supply outstrips demand? Only time will tell!
But remember, in the world of finance, there’s always room for a good old-fashioned short squeeze. It’s like when you decide to wear your favorite jeans and then realize you can’t quite fit into them anymore. The pressure is on to cover those short positions, and short sellers may be closing up shop early.
So, as we “spring forward” with our clocks and try to make sense of the financial world, remember that the Fed might still have a few tricks up its sleeves. And if all else fails, we can always rely on those unpredictable job reports to keep us on our toes.
Wishing you a day filled with laughter, financial stability, and maybe even an extra hour of sleep (if only in our dreams)!