New high in HH Net Worth
Sept 20, 2019
–A skim of morning headlines underscores continued official/gov’t responses to sluggish conditions: China cut rates as expected. India cut taxes by $20 billion, sparking a 5% jump in SENSEX. Saudi Arabia strongly advising wealthy families to invest in Aramco IPO (can’t put it in a new “Vision” fund if it’s recycled back into oil, which means that new cash injections into WeWork will be strangled). In terms of global growth, the OECD downgraded its forecast to 2.9%.
–Slow action Thursday with yields drifting lower by 1-2 bps. Tens fell 1.4 to 1.772%. EDZ9/EDZ0 remains the lowest one-year ED calendar at -49.0. Implied vol seeped out with ED straddles down 0.5 to 2.0. Fed effective for Wednesday was 2.25%, but a settle of 9812 in FFV9 suggests the Fed is getting the repo squeeze under control. (9812 is 1.88%, exactly 25 bps below the Fed effective setting in the first two weeks of Sept, 2.13%).
–One somewhat interesting note is that blue atm straddles are now settling at or slightly above greens. Example: 2EH 9850^ 40.5s ref 9856 in EDH22, and 3EH 9850^ 41.0 vs 9849. (the red 0EH 9850^ settled 41.5 vs 9856.0). Does this modest relative bid in blues indicate the possibility of curve steepening ahead? Or is it just a paring back of green longs…
–April FF, FFJ0 at 9853.5 is 41.5 bps higher than FFV9 with 4 FOMC meetings between the two, so the market has pared back the idea of continued easing. FFJ0 probably worth a buy on a pullback, I would look at buying some deferred ED calendars against it. –Fed’s Z.1 report out today. a data set which typically is trumpeted as showing a new high in Household Net Worth. It will probably be the same this time due to an increase in home prices; equities were essentially flat in Q2. My headline beats them to it.
