FOMC day
March 16, 2022
–FOMC today with 25 bps expected. FFJ2 settled 9964.0 or 36 bps, 28 above the current EFFR. January ’23 FF contract settled 9818.0 or 1.82%, indicating 25 bps at every meeting through the end of the year, just like the 2004/2006 cycle which featured hikes at every FOMC meeting for 2 years.
–Main feature yesterday was the implosion of front end straddles. EDU2 9825^ settled 62.0 vs 68.0 on Monday with futures unch’d at 9820.5. EDZ2 9825^ declined from 86.5 to 81.5 with EDZ2 +0.5 at 9786.0. The 9800/9750/9700p tree which was sold 50k last week at -2 (paid 2 to buy the two legs) settled 6.25 yesterday with the 9800 put over. While near dated straddles declined, long green premium remained unchanged on the day.
–The oil spike associated with Putin’s invasion was completely erased yesterday with CLJ -6.57 to 96.44. There are increasing signs that a compromise agreement is drawing closer, but PPI still posted a 10% yoy increase. Retail Sales today expected +0.7 from a 3.8% gain last month.
–From December’s SEP or projection darts, PCE prices for 2021 were raised to 5.3% from September’s 4.2. That number likely has to rise again. For 2022, Dec was 2.6 up from September’s 2.2. Core PCE in Dec was only raised to 4.1% from 3.7 in Sept. For 2022, 2.7 from 2.2 and in 2023, 2.3 from 2.2. Somewhat interesting that GDP was revised DOWN from 5.9 in Sept to 5.5 in Dec. For 2022 the it went up a bit to 4.0 from 3.8 , and in 2023 down again from 2.5 to 2.2. The NY Fed long ago suspended their GDP Nowcast, citing COVID uncertainty as an excuse, the FOMC should have done the same thing with the dot plot.
