Ten year auction today. CPI and FOMC tomorrow
June 11, 2024
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–Yields edged a bit higher yesterday, with tens up 4 bps to 4.467%. European bond yields surged on election results; the French 10y rose over 12 bps to 3.223% as Macron called for a new snap election. Domestically, the three-year tailed with tens being auctioned today, followed by 30s Thursday. CPI and FOMC tomorrow.
–AAPL reversal day, closed -1.9% as yesterday’s AI presentation underwhelmed the market. There is now a triple top around 200, having just failed that level in July of last year, then again in December, and now yesterday. (yest high 197.30). Top of the AI craze?
–CLN4 up 2.38 late to 79.91/bbl. Besides the 10y auction, news today includes the NFIB Small Business Optimism Index, which has been consistently weak. It’s expected 89.7, same as last month.
–SFRZ4 was only down -0.5 yesterday to 9504.5 or 4.955%, essentially pricing the midpoint of one or two rate cuts by year end. The lowest contract on the strip is front June at 9465.25 and the peak contract is SFRU’27 at 9615.5. Over a greater than three year span the spread is just 150 bps. The gold pack, 5th year forward, settled yesterday just above 9610 or 3.90%. Not long ago the one-year calendars were more inverted than 150 bps. In 2001 and 2007-8 the Fed was forced to cut aggressively. In 2001, the Fed slashed 275 in six months, and in 2007 to 08, 300 bps of cuts in six months…with more cuts following in each cycle. As of now, the SOFR strip is projecting a ‘soft landing’ as rates 3, 4 and 5 years forward hover between 3.75 and 4%.
