Well, if you adjust it by the price of REAL money…
March 27, 2025
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–Yields ended slightly higher, with tens and 30s both up 3 bps to 4.334% and 4.682%. SOFR contracts from Z5 to Z9 down 1.5 to 3 bps. 7-yr auction today.
–While price changes were minor, vol firmed, perhaps a spillover from weak equity prices, with SPX falling 1.1%. VIX slightly higher at 18.52. Early buyer of 80k SFRZ5 9562.5/9537.5ps for 1.75. Top strike 4.375% with EFFR 4.33%. New buyer of 40k SFRM5 9550 for 0.5. That strike is currently 38 bps otm and 17 bps above current EFFR. The 9562.5p also settled 0.5. Of course it could be uncomfortable being short wings for 2 ½ months if the wheels come off the rails. Also a roll of 22k 0QM5 9712.5c into 0QU5 9750c, settled 4.5 in 0QM5 vs 9643.0 in M6 and 5.25 in 0QU5 vs 9645.5 in U6. Extending the time but paying for it with a much higher call strike.
–It feels as if there’s energy building below the surface in rates. However, prices and spreads are muted for the time being. NY Fed released its March Corporate Bond Distress Index, and… nothing to see here:
- Corporate bond market functioning appears healthy. The end-of-month market-level CMDI is unchanged compared with last month and is just below its historical 5th percentile.
–The tendency is always that things look ok, maybe a few small cracks, and then ka-boom. Typically looks obvious in hindsight. Maybe that’s the message of gold, with GCJ5 up $26 this morning over 3048, looking to test recent all-time-highs.
–Final Q4 GDP today. But as we approach the end date of Q1, it’s probably more important to focus on ATL Fed’s GDPNow which is -1.8%. So I pulled up the site:
https://www.atlantafed.org/cqer/research/gdpnow
and had to rub my eyes! Is THIS NEW?? They’ve now added a GOLD-ADJUSTED GDP-NOW!! We’re not in Kansas anymore.
