Headline inflation expected 3%. Mission accomplished?
July 12, 2023
–CPI today, expected headline 3.1 from 4.0 and Core 5.0 from 5.3 last. No matter what it’s not likely to change expected hike on July 26, with Aug FF settling 9470 or 5.3%. FFF4 settled 9460.5.
–SOFR curve flatter (more inverted) yesterday. SFRZ3 -4.0 at 9459.5, Z4 -2.0 at 9594.0, Z5 +2.5 at 9640.5 and Z6 +5.0 at 9652.0. A couple of notable downside trades on Z3, about 35k of each bought:
SFRZ3 9450/9400/9375/9350 p condor, paid 13.0 and Z3 9425/9412.5/9400p fly paid 1.25. Both target 5.75-6.00 FF.
–SOFR midcurves for July expire Friday. SFRU4 settled 9562.0 and the atm 0QN3 straddle settled 20 bps. Quite expensive. 2QN3 9637.5^ settled 16.0 ref SFRU5 9635.0.
–Nice push of 2-3/64ths lower in treasury straddles in last couple of minutes prior to settle, appears to be market makers successfully painting lower marks.
–10 year auction today, along with Beige Book.
–Johnson Redbook showed year/year contraction in same store sales. Other anecdotal information also suggests a sluggish consumer…with respect to Rolex watches anyway.
https://watchcharts.com/watches/brand_index/rolex
