Guns and butter. Both more expensive
December 10, 2021
–CPI today expected 0.7% month/month and 6.8% yoy with Core 4.9%. Biden already warned it would be a high number. Yesterday’s 30-yr auction was a bit sloppy with a 3.2 bp to 1.895%; real rates are still extraordinarily negative. At the same time, China is taking steps to arrest strength in the yuan by fixing it at 6.3702, well lower than expectations. An interesting Reuters story says the US Defense Dept is trying to halt sales of critical technology to Chinese chipmaker SMIC, while some in the Commerce Dept are trying to block the DOD proposal. Guns or butter.
–Biden argues that his steps to bring down gas prices will be deflationary. China’s steps to weaken the ccy: inflationary. Stop selling defense secrets to chipmakers, more bottlenecks, inflationary. Jobless Claims at new record low 184k, inflationary.
–Curve flattened a bit even with a bad auction. In dollars, reds fell 1.625 bps and golds rose 3.375. The December ED midcurve options expire today.
–Imagine for a minute if Jussie Smollett had been competent. There would be rioting, looting, violence against innocents in the streets…oh, nevermind.
