Get ready for QT
April 7, 2022
–Curve continues a modest bounce with the two-yr yield unchanged at 2.50% and tens up 5.6 to 2.605% as the Fed readies a plan to trim the balance sheet by $95 billion per month. Stocks retreated yesterday but stabilized after the minutes. A 50 bp hike in May is now a foregone conclusion. July’22 Fed fund contract settled 9869.0 or 131 bps with Fed Effective at 33 bps, indicating 50 in May and 50 in June.
–Implied vol eased slightly in near contracts but rose in bonds; the market may not quite be ready for the implications of QT. Bullard, Bostic, Evans and Williams all scheduled for comments today. CPI is released next week on Tuesday and is expected to print 8.4%, followed by PPI the next day. Oil fell 5.73 yesterday with CLK2 settling 96.23; small bounce this morning.
–The problems with urban real estate continue with the owners of Chicago’s iconic Water Tower Place apparently handing the keys back to the lenders and walking away. The Chicago Tribune notes “The Michigan Avenue crisis is getting worse.” The crown jewel of Chicago’s tourist experience is crumbling.
