Focus on prices, but that’s no longer the main driver
July 26, 2024
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–News today includes the Fed’s preferred inflation gauge, PCE prices. Expected 0.1 from 0.0 month/month and 2.4 from 2.6 yoy. Core 0.2 from 0.1 with yoy 2.5 from 2.6.
Note, yesterday’s Core PCE QoQ was higher than expected at 2.9%. Olympics begin. Trump speaking at Bitcoin conference in Nashville tomorrow. FOMC Wednesday.
–Ten year yield fell 3.4 bps to 4.254%. Curve flattened after making slight new ytd highs on Wednesday. 2/10 went out at -18.7 (down 5.5) and 5/30 at 35.5 (down 2.7). From open interest it appears as if there was heavy long liquidation in TU and FV as open interest in those contracts fell 81k and 27k. TY open interest jumped 41k, likely related to large option flows. There was a buyer yesterday of >100k TYU4 112c. High price paid was 31 for 50k covered 111-045 with 31d. Final settle was 22 vs 110-255 (28d at that level), so marked well against the peak buys. Open interest in the calls was +102k so obviously new. August treasury options expire today. In TYQ 111.25p there were liquidating sales at 31 and 32. Open interest in that put fell 22k. (settled 31, 29 itm). Vol firmed across treasuries. TYU atm 110.75^ settled 1’35, or 6.2, still probably a bit cheap. Yen carry adjustments appear to be the biggest driver; $/yen slightly higher this morning at 154.25.
–Flattening most evident on SOFR curve (from reds back). SFRZ4 unch’d at 9534.5, Z5 DOWN 3 at 9631.5, Z6 unch’d at 9648.5, Z7 UP 2 at 9645.5. While SFRU4/U5 rose 4.5 to -123.5. Euribor U4/U5 made a new low settle at -97.
–What’s the state of the ‘aspirational’ US consumer? LULU Lemon yoga pants half off! On January 2, LULU was 505.38. Yesterday, 247.32.
Euribor calendar pictured below
