Yields press higher into auctions
February 6, 2024
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–Yields continued to rise going into the start of auctions, with the three-year today. Tens jumped another 13 bps yesterday to 4.16% as ISM Service data and prices were stronger than expected. Today also features Fed comments by Mester, Kashkari and Collins. Goolsbee said yesterday that he doesn’t want to rule out a March cut, however, the market has pretty much removed that possibility. FFJ4 settled 9471.5 or 5.285% vs EFFR of 5.33.
–New high settle in SFRH4/H5 at -136.5 as reds were hit hard. SFRH4 fell 12.5 to 9613.5. Red pack -13.5. Everything from June’25 to golds (5th year) were down 13 to 14.
–SNAP yesterday said it would cut about 10% of its workforce (528 people). Not a big number, but layoff announcements appear to be at odds with Friday’s payroll data. Fed’s Sr Loan Officer Survey (SLOOS) was out yesterday. From the report, “…survey respondents reported tighter standards and weaker demand for C&I loans to firms of all sizes over Q4” Same with Commercial Real Estate. “Moreover, for credit card, auto and other consumer loans, standards reportedly tightened, and demand weakened on balance.”
Anecdotal evidence seems to suggest a weakening economy.
–Attached is chart that shows Russell 2k divided by Nasdaq 100. Even lower than the dotcom bubble in 2001. When Nasdaq started to deflate, the Fed was spurred into aggressive easing in 2001 (200 bps in 4 months). CPI at the time was right around where it is now, 3.4%.
