Title: Low correlations, high dispersion, and a bond-curve divergence into payrolls Show: PauloMacro's Substack chat (open.substack.com) Guest: Paulo (pseudonymous, aka Cloudbear) -- author Date: 2026-09-01 URL: https://open.substack.com/chat/posts/95eed3e2-520e-4cdc-a2e6-94987a69e3b9 Length: written chat note -- no timestamps Note: Substack chat note (short-form, ~200 words), saved verbatim as pasted. Morning note for Tue 1 Sept 2026, the first session after August month-end. No charts referenced and no securities named -- the objects are correlation/dispersion, Treasury note and bond futures (2yr, 5yr, 10yr vs 30yr), August non-farm payrolls (due Friday 4 Sept) and the Citi Economic Surprise index. He promises "a note later today" that is not part of this chat post. The NEXT day's chat note (2026-09-02) refers back to "yesterday's trade idea in palladium" -- that palladium idea was a SEPARATE 2026-09-01 chat post and is not this one, so it remains uncaptured. Wording verbatim; no timestamps exist for a written chat post.
Tue 1 Sept 2026... good morning... with month-end out of the way (remember what we say about month end: whenever I feel the urge to trade it, etc etc).
My mind keeps coming back to just how low correlations (and how large dispersion) has become as the tension builds toward a market vulnerability or state of criticality that results in Risk Off. As with everything in the market, it takes far longer for conditions to decompress than you think, but then it always happens faster than you imagined (to paraphrase Dornbusch). I will have more to say about this in a note later today. In the meantime, positioning in bonds continues to catch my attention, along with a notable divergence between 2yr, 5yr, and 10yr notes/bonds making new lows in futures while the 30yr has not broken down. Maybe nothing... maybe something. With August payrolls coming up this Friday, recall I have discussed at length since June the prospect of a soft patch in US data between midyear and mid autumn, and the Citi Economic Surprise index would suggest this is happening. Will a miss on NFP be enough to shake Risk and push some rotation in bonds' direction? We'll see...
Stay frosty...