All good
February 14, 2020
–Yields edged slightly lower as the treasury wrapped up the 30-yr bond auction at a rate of just 2.061%. Tens fell 1.3 bps to 1.617% and euro$ contracts had similar moves, closing flat to +1.5. A week ago Ken Griffin said markets are “utterly and completely unprepared for a jump in inflation.” Probably because they don’t need to be… however, CPI yesterday was 2.5% yoy with Core 2.3%, and the NY Fed’s Underlying Inflation Gauge is now 2.3 for the full data set and 2.2% for prices.
–Today’s news includes Retail Sales expected +0.3% and Industrial Production -0.2%.
–Money continues to flow into US markets. The dollar index has risen about 2.6% since the start of the year, accelerating with the virus. –Turkey/Syria conflict looks set to further accelerate in Idlib, bringing the risk of US/Russia hostilities by proxy. COVID-19, locust swarms and proxy wars with hundreds of thousands of refuges. All to benefit US homebuyers that can get cheap mortgages.
–Some senators are thinking twice about Judy Shelton’s Fed nomination, worried about her views regarding the gold standard and the Fed’s independence. The latter issue is likely the larger risk. Senator Richard Shelby voiced concerns about Shelton not being ‘a mainstream economist’. I’m not sure that ‘mainstream’ is the credential by which judgment should be made in these times of unconventional policy, but I certainly think the Fed’s independence is more important than ever. Another nomination defeat, partially as a soft rebuke after the impeachment circus?
–Treasury vol remains compressed, near the lower end of the range. TYM 130.5 straddle settled 2’11 or 4.0%. Expiration of Feb midcurves today. 3EG 9862.5^ settled 5.0 vs 9859.0. Looking for a relatively quiet Friday.
