Against the wind
December 1, 2023
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–SFRU4 settled -7.5 at 9547.0, at the first buy level of Wednesday’s block buying spree. The final purchase price was 9555.0. This morning the contract is printing 9553.0; last Friday’s settle was 9520.5. The market synthesized Waller and Ackman’s comments from earlier in the week and essentially priced another 25 bp cut. The most inverted one-yr calendar is March’4/March’5 at -126. Last Friday’s settle was -110. SFRZ3/Z4 was -91.5 last Friday and -117.25 yesterday, a net change of almost exactly one-quarter pct.
–PCE inflation news was good with PCE yoy 3.0 and Core 3.5%. WSJ’s Timiraos notes that the six-month annualized rate for Core is 2.5%, nearing the 2% target. The question is whether that data gives the Fed confidence that inflation is going to hit its 2% goal. Powell will weigh in on that today (11:00 EST), and I suspect he will say that much more evidence is needed. DJIA made a new high for the year yesterday and other financial conditions have eased significantly, reversing factors that had supported the fight against inflation. Oil’s a wildcard, with murky prospects regarding production cuts. Powell has every incentive to lean against easier pricing.
–ISM Manufacturing this morning expected 47.8 from 46.7 last. It’s been sub-50 for over a year. Payrolls are next Friday.
