Why The Macro Is Still Bullish Liquidity | Weekly Roundup

Episode Summary

Executive Summary: The episode argues that the U.S. labor market is weakening beneath noisy hurricane/strike distortions, making a 25 bps Fed cut in November and likely another in December nearly certain. The hosts also assess elevated election-driven volatility across rates and equities, debate Trump-vs-Harris market impacts, review Treasury issuance/QRA dynamics, and highlight MicroStrategy’s aggressive Bitcoin accumulation as a major capital-markets trade.

Main Topics: Jobs report: weak headline, noisy distortions, and worsening labor internals (Priority: 5/5): The hosts dissect the soft NFP print, emphasizing hurricane disruptions, strikes, negative revisions, rising permanent layoffs, and a near-higher unemployment rate on an unrounded basis. They conclude labor market momentum is fading meaningfully. Fed policy outlook: November and December cuts seen as locked in (Priority: 5/5): They argue the labor data and broader inflation backdrop do not alter the Fed’s September path. With PCE near target and wage pressure easing, they expect the Fed to continue easing as planned. Election-driven volatility in rates, equities, and credit (Priority: 5/5): The conversation centers on heightened hedging into the election, with elevated MOVE and VIX levels reflecting fear around the vote outcome and possible contestation rather than a broad macro deterioration. Treasury issuance and the QRA / debt-funding discussion (Priority: 4/5): Quinn explains the Quarterly Refunding Announcement, projected borrowing needs, and a greater reliance on bills versus coupon issuance. The segment argues Treasury has tools to manage funding pressures despite rising deficits. Credit markets remain firm despite Treasury volatility (Priority: 4/5): Tyler highlights that high-yield spreads, leveraged-loan conditions, and credit risk indicators remain tight, suggesting the selloff is primarily a duration/Treasury phenomenon rather than a credit crisis. MicroStrategy’s premium and Bitcoin treasury strategy (Priority: 4/5): The hosts revisit their earlier view that MicroStrategy would monetize its elevated premium by issuing equity and buying Bitcoin. They see the company’s strategy as a durable arbitrage tied to BTC treasury demand.

Key Arguments: The labor report is weaker than the headline suggests because hurricanes, strikes, and revisions are distorting the print; underlying employment is close to flat or negative. Permanent layoffs hitting a cycle high is a more substantive warning signal than temporary disruptions. The Fed is unlikely to be swayed because inflation is near target on a PCE basis and wage inflation is not reaccelerating. The market is pricing election uncertainty far more aggressively than the underlying macro data justify. Treasury volatility is rising mainly from duration/sovereign-supply concerns, while corporate credit spreads remain tight, implying no broad credit stress. Higher Treasury bill issuance and stablecoin demand could help absorb supply, even as deficits rise. MicroStrategy’s premium to Bitcoin value creates a powerful incentive to issue equity and accumulate BTC over time. The election could be a sell-the-news event in yields and the dollar, especially if market fears about deficits prove overstated.

Data Points: Nonfarm payrolls: 12,000 - October jobs report headline print versus 113,000 consensus Consensus NFP forecast: 113,000 - Market expectation for the jobs report August jobs revision: -81,000 - Revised from 159,000 to 78,000 September jobs revision: -31,000 - Revised from 254,000 to 223,000 Unemployment rate: 4.1% - Official rounded rate in the jobs report, flat month over month Unrounded unemployment rate: 4.05% to 4.14% - Hosts note the unrounded rate rose nearly 10 bps Weather-related absences: 512,000 - People employed but absent from work due to weather Job losses in durable goods manufacturing: -47,000 - Attributed partly to Boeing strikes JOLTS job openings: 7.443 million - Reported earlier in the week, below 7.99 million consensus JOLTS consensus: 7.99 million - Expected job openings level Fed target PCE: 2.1% - Hosts say headline PCE is essentially at the Fed’s 2% target PCE target: 2% - Official inflation goal referenced by the hosts S&P 500 reporting season beat rate: 75% - Share of companies beating earnings estimates so far S&P 500 reported companies: 55% - Portion of the index that had reported earnings at the time EPS year-over-year growth: 9% - Aggregate earnings growth in the current reporting season High-yield issuer count: 910 - Number of bond issuers, the low since August 2020 Decline in high-yield issuers since 2022: 8% - Down from the beginning of 2022 Leveraged-loan borrower interest savings: $2.9 billion annualized - Savings from repricings due to lower borrowing costs Treasury borrowing need this quarter: $546 billion - QRA estimate for current quarter Treasury borrowing need next quarter: $823 billion - QRA estimate for January–March 2025 Increase in quarterly borrowing: $277 billion - Projected jump between quarters TGA balance: $880 billion to $700 billion, then back to $850 billion - Treasury cash balance path discussed in the QRA Bill issuance share this quarter: 13% - Share of total Treasury issuance represented by bills Bill issuance share next quarter: 45% - Projected increase in bill issuance Tether Treasury holdings: $80 billion - Example of stablecoin demand for U.S. bills MicroStrategy premium move: 50%+ - Premium over Bitcoin holdings expanded in about a month MicroStrategy after-hours move: -12% - Stock reaction after earnings/issuance announcement VIX November 16 put contracts bought: 126,000 - Large downside vol bet cited in the options market VIX November 15 put contracts bought: 112,000 - Second large VIX put position VIX November 20 put contracts bought: 110,000 - Third large VIX put position Increase in VIX open interest: 18% - Noted alongside the large put buying Metaplanet stock performance: 1,151% - Cited as an example of the Bitcoin treasury arbitrage Move in the 10-year yield since the prior reference point: ~7 bps - Tyler notes yields are up even after the soft NFP Probability of a November rate cut: 98% - Market pricing referenced by the hosts

Pivotal Quotes: "I think it feels like 25 bps cut in November next week is a lock. I would even say that the December cut is a lock." — Host: Jobs report reaction and Fed outlook "We're basically setting up for a crazy event." — Tyler: On elevated implied volatility and election hedging "I just think that like the hysteria in the market ... I can't wait for the election to be done." — Quinn: On election fear, contested outcomes, and volatility pricing

Implications: Markets are likely over-hedged into the election, while the Fed stays on a clear easing path. If the vote resolves cleanly, volatility could collapse, helping rates, credit, and risk assets; the bigger near-term risk is a contested result or policy surprise.