Buy Now and Really, Really, Really Pay Later
December 26, 2023
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–Once again, new low in SFRH4/M4 at -49 (9501.5/9550.5). The lowest of any 3-month spread over the past year was -58, but it was a forward spread, on BBG SFR5 vs SFR6, (though in the old convention I’d call it last white to first red or 4th to 5th). H4/M4/U4 fly settled -9.0 (-49/-40), worth buying -14 to -12.
–Inflation data confirm the Fed is done. Six month annualized Core PCE 1.9%. April FF for the first time settled more than 25 lower in yield than a 25 bp cut. That is, Fed Effective is 5.33% or 9467. A 25 bp cut would be 5.08% or a price of 9492.0. FFJ4 settled 9492.5.
–News today includes Chicago Fed’s National Activity. It’s around the lowest level since covid. November 2022 the low was -54, March 2023 the low was -50. Last was -49. If I know Goolsbee it will be around -30. He’s quite a prankster.
–This week’s auctions kick off with $75b in 13-week bills, $68b in 26-week bills, $44b in 52-week bills and $57b in 2-yr notes. Total $244b, nearly a quarter of a trillion dollars… I guess SOMEONE ran up the credit card bill going into Christmas. And there’s more coming on Wednesday and Thursday (5s and 7s and other various bills and FRNs).
–This is probably nothing (Game of Trades)
