26 Sep 2013
Flash: Mild market weakness the historic precursor to US Gov shut down - DB
FXstreet.com (Barcelona) - Deutsche Bank DB FX strategist Alan Ruskin notes that of the last 17 government shutdowns, the S&P 500 has showed a pattern of being down in the 10 days before shutdown (median performance -0.33%) and up 10 days after any shutdown resolution (+1.1%).
Key Quotes
“So far, we seem to be modestly underperforming that historical pattern. With three days to go, the S&P 500 is down 0.7% over the last seven trading sessions. In terms of bonds, 10yr UST yields have tended to go up in the 10 days before shutdowns (median performance: +5bp) and have rallied in the 10 days after resolution (-6.8bp).”
“Over the last seven days, yields are actually down about 22bp. Meanwhile the US dollar index has usually weakened prior to a shutdown (-0.5%) and strengthened in the 10 days afterwards (+0.5%).”
“The USD index is down 1% over the last seven days with three more days to go. So the above shows that a shutdown is neither unique nor is it something that tends to deeply stress the market in advance. Mild weakness is the default historical precursor to it.”
Key Quotes
“So far, we seem to be modestly underperforming that historical pattern. With three days to go, the S&P 500 is down 0.7% over the last seven trading sessions. In terms of bonds, 10yr UST yields have tended to go up in the 10 days before shutdowns (median performance: +5bp) and have rallied in the 10 days after resolution (-6.8bp).”
“Over the last seven days, yields are actually down about 22bp. Meanwhile the US dollar index has usually weakened prior to a shutdown (-0.5%) and strengthened in the 10 days afterwards (+0.5%).”
“The USD index is down 1% over the last seven days with three more days to go. So the above shows that a shutdown is neither unique nor is it something that tends to deeply stress the market in advance. Mild weakness is the default historical precursor to it.”