Good demand for 3’s; large ten-yr auction today
February 7, 2024
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–Yields pulled back from highs made post-NFP, with tens down 7 bps to 4.09%. However, futures are down slightly this morning in front of today’s FORTY-TWO billion 10y auction. TYH4 settled 111-09 and currently prints 111-03+. Auction coincides with news that the SEC is considering new regulatory “fixes” on the basis trade. Impact on liquidity?
–NYCB back in the news, having been downgraded to junk by Moody’s. KRE, the regional bank ETF was down 1.26% yesterday to 46.97. Post-SVB in May it had reached 35. That’s when the first SOFR 1-yr calendar hit -192 as the Fed held off on the idea of easing despite banking turmoil; fronts were held down while back contracts soared. Around that time the green sofr pack (3rd year forward) traded around 9725. Current SFRH4/H5 is -143 (9478.5/9621.5) and the green pack is 9659.
–Plenty of Fed comments today, including Kugler (new to the Fed board) at 11:00, then Collins, Barkin, Bowman. April FF settled up 1 at 9472.5, about 5 higher than Feb, which is pegging the current EFFR of 5.33%. The May FOMC is May 1, and FFK4 settled 9487.5. If the Fed eases by 25, then EFFR should go to 5.08% or a price of 9492. Recall that FFJ4 had previously settled above 9492 on Dec-27 (high settle 9494).
–Consumer Credit released at the end of the day. Last (November) was $23.75b, with a whopping annualized gain of 17.7% in revolving credit. Expected $16 billion for Dec.
