Global tightness
June 7, 2022
–RBA hiked by more than expected 50 bps to 0.85%. Yen continues to make new lows, now at 132.69 having been 115 at the beginning of March. This morning bitcoin is back under 30k. This is the second recent failure; on May 31 it rallied to 32k and looked like a breakout from the long sideways bottom, but the very next day the move was reversed. Same thing yesterday: a feeble move nearing the May 31 high, and complete reversal today. Bearish.
–US equity futures also reversed from yesterday’s early morning highs and are lower this morning. Yields moved higher through the day and the curve steepened, with auctions beginning: 3s today followed by tens and thirties Wednesday and Thursday. The two year rose 6.3 to 2.73% while tens jumped 8 to 3.035%. On the euro$ strip, greens were weakest, with the pack down 11.375. As June expiration approaches, June’22/June’23 one-year calendars are all at recent highs, with euribor close to 200: EDM2/M3 178. ERM2/M3 198. SFIM2/M3 (sonia) 147.5. October Fed Funds settled 9773.0 or 227 bps. Current Fed Effective is 83. If the Fed hikes 50 at each of the three meetings prior to October, then Fed Eff should be 233 or a price of 9767.0. FFV2 is just 6 bps shy of that projection.
–Consumer Credit this afternoon expected $35.0b for April vs the March whopper of $52.4b. A sign of underlying consumer confidence, or desperation? Here’s some concrete and useful analysis, a bit different from the normal “can’t time the market, just hang on” stuff:
“There is a fire narrative, and that fire narrative is inflation. And then there is a bit of an ice narrative, that recession talk, hard landing or soft landing,” [Tom Pick of Morgan Stanley] said. “We’ll have these periods where it feels awfully fiery, and other periods where it feels icy, and clients need to navigate around that.” Huh? Thanks…I guess
