Bailouts for everyone. We’ll just BORROW it
Sept 7, 2022
–Large jump in yields. US tens surge 14 bps to 3.33 while bonds closed at the highest yield level since 2014 at 3.475, up 13.4. Twos gained 9.2 to 3.49%. Tens still haven’t taken out the high from mid-June this year, which was 3.476. After that, it’s back to the 2011 high of 3.74. Curve bear steepened. On the euro$ curve, reds were down 12.875, while golds were -17.5. Negative factors include corporate issuance, inflation concerns, CB actions, QT. However, when protests are breaking out all over the world due to crushing energy costs, and the only solution by gov’ts is handouts, is it a surprise that yields move higher?
–On the SOFR strip, another large buy (10k block) SFRZ4/SFRZ6 at -5.5. On August 31 he paid -15.5 for 10k. New buys. Spread settled -2.5 (9691.0/9693.5).
–After Friday’s payroll data, odds of a 75 bp hike for Sept 21 were trimmed, but yesterday FFV2 settled 9698.5, -4 on the day, again indicating a heavy lean toward 75. SFRU2 settled 9674.5. There’s really no way to justify that price WITHOUT 75 at the Sept meeting. According to my calcs, that price is low even with 75 in Sept and 25 in Nov. $/yen now above 144, highest since 1998.
–Richmond Fed’s Barkin in the FT this morning: “I have a bias in general towards moving more quickly, rather than more slowly, as long as you don’t inadvertently break something along the way.” [ Insert “THIS IS FINE” meme here ]
–Brainard today followed by Beige Book. Powell tomorrow.
