Ain’t it a BTCH?
March 5, 2024
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–In rates futures, much of Friday’s rally was reversed. The curve flattened, with 2y +7.7 bps to 4.606%, 5y +5.1 to 4.208%, 10y +3.9 to 4.217% and 30y 2.6 to 4.353%. On the SOFR strip, reds were weakest, settling -7.625 at avg 9610.375. Red/green pack spread closed at a new recent low of -29.5 (Grns down 4.375). Not particularly surprising to see relative pressure on the front end as Powell goes before Congress tomorrow; he will likely emphasize this line released in Friday’s Monetary Report: “The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.”
–Explosive moves in bitcoin, gold and silver probably don’t help the case for those betting on a quick ease. March bitcoin (CME symbol BTCH; an appropriate twist of the knife for shorts) which was below 40k in Jan, settled 68480, +4655. GCJ4 settled 2126.30, +30.6. As various House members righteously criticize Powell for the Fed’s mismanagement, he might remind them that reckless fiscal spending factors into the demand for alternatives to USD. He won’t do that of course…
–News today includes Factory Orders and ISM Services, expected 53.0 from 53.4. Prices paid 62.0 from 64.0. Given that Core Service prices have been cited by the Fed as a sticking point in the inflation fight, this release could have a bit more importance than usual.
–A couple of exit trades in SFRZ4 options. SFRZ4 9600/9550/9500 put fly sold at 11.5m 20k, settled 12.25 ref 9552.0. This trade gains value over time if the market sits right around the center strike. Straddles have come down a reasonable amount in the past week, but my guess is that mid-March to mid-April will get a bit more wild.
SFRZ4 9475p cs covered 9552, 16d vs SFRZ5 9475/9400ps covered 9632.5 8d, 2.5 paid for front Dec on exit, 26k. Settled 10.75 and 9.0.
