Later
May 27, 2024 – Weekly note
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Japan 10y yield 1.00%, new high for the year. Was 61 bps on Dec 29, 2023. Now at the highest since 2012. The 20y yield is 1.856% also at a new high. Highest since 2011.
The weakest contract on the SOFR strip was SFRM5, down 17.5 on the week at 9540. On April 4, less than 2 months ago, SFRZ4 was 9542. That contract is now 9499.5. Roll down has been fierce given the context of steady (restrictive) Fed policy.
On Dec 29, 2023 SFRM5 was 9679.0, a decline of 139 bps on the year as easing expectations have been dramatically pared back. Chart below is SFRM5/SFRM6 which has fallen like a rock this year as reds have led the way lower.
By contrast, the 2/10 constant maturity treasury spread has only gone from -37 bps on 12/29/23 to -48 currently. Of course, using constant maturity two-year doesn’t really capture the roll.
ECB expected to cut on June 6, with both Olli Rehn and Philip Lane citing disinflation trends. US Fed releases the Beige Book Wednesday. PCE prices on Friday expected 2.7% yoy with Core 2.8%, both same as last month. FOMC is June 12. July Fed Funds are 9467/67.5, exactly pegged to current EFFR of 5.33%, indicating near zero odds of an ease by the Fed. Closing arguments in Trump’s trial expected Tuesday.
Japan’s 20y yield rose 10.4 bps last week while the US 30y was up only 1.2 bps. Do more attractive yields in Japan portend a shift in capital away from US long end?
On Monday May 20, DJIA made a new high, posted an outside day, and fell into the end of the week. Following NVDA earnings, both SPX and CCMP (Nasdaq Comp) made new highs early, but had outside day ranges and closed lower (Thursday). Friday featured rebounds, but not to new highs. VIX ended the week at 11.93, stupidly low given possible reversal patterns in equities. Low risk entry for long VIX structures; exit on new highs in SPX and CCMP.
| 5/17/2024 | 5/24/2024 | chg | ||
| UST 2Y | 482.2 | 494.8 | 12.6 | |
| UST 5Y | 444.0 | 452.9 | 8.9 | |
| UST 10Y | 441.8 | 446.6 | 4.8 | |
| UST 30Y | 455.9 | 457.1 | 1.2 | |
| GERM 2Y | 298.6 | 308.7 | 10.1 | |
| GERM 10Y | 251.5 | 258.3 | 6.8 | |
| JPN 20Y | 175.2 | 185.6 | 10.4 | |
| CHINA 10Y | 231.7 | 231.4 | -0.3 | |
| SOFR M4/M5 | -88.3 | -74.3 | 14.0 | |
| SOFR M5/M6 | -48.0 | -54.5 | -6.5 | |
| SOFR M6/M7 | -12.5 | -17.5 | -5.0 | |
| EUR | 108.72 | 108.56 | -0.16 | |
| CRUDE (CLN4) | 79.58 | 77.72 | -1.86 | |
| SPX | 5303.17 | 5304.72 | 1.55 | 0.0% |
| VIX | 11.98 | 11.93 | -0.05 | |
