Bond yield warming up
February 8, 2021
It’s about 0 degrees Fahrenheit in Chicago. This is what happens when you live in a city neighborhood and the street plows bury you in after a snow. The picture below may seem a bit strange to the uninitiated, but that’s what people do when they go through the toil of shoveling out their cars. Almost looks a bit festive. Lawn chairs, buckets, milk crates placed in empty spots to hold them. Festive that is, unless you move said items and park your car in a spot you didn’t shovel out. Probably the best retribution I heard of is bringing out the garden hose and setting it to a medium mist, encasing the entire vehicle in ice. Takes a bit of time, but then again so did the initial shoveling. It’s the purest form of capitalism. “I did the work, and now that’s MY spot until everything melts down” (and that’s not happening here for another two weeks). Of course, there is also compassionate capitalism, shoveling out an elderly neighbor’s car, asking them where a spare lawn chair is.
–Last week ended with new highs in the curve even as the employment data printed on the weak side. 2/10 at 106.2, up 3.8. 5/30 at 150.6 up 3.2, and red/gold euro$ pack spread 109, up 2.625. Also worth noting that the ten year treasury vs inflation-indexed note closed at a new high of 219.4, regaining the high after the last tip auction temporarily caused a drop of 10 bps.
–On Friday afternoon, consumer credit was released for December, and revolving credit (credit cards) showed another drop, falling over $35 billion, a -3.6% annualized rate. The level is $976 billion, down from the 2019 level of $1.094T. Non-revolving car and school loans are at $3.208T, a new high, +4.8% annualized. The narrative is that government transfers have allowed the revolving decline, which will transform into pent-up demand this spring.
–USH settled lower the last four days of the week, but there has yet to be evidence of panicky put buying. The cash yield is at its highest since February of last year with 30’s printing 2% this morning. This week features $126 billion treasury auctions, comprised of $58b 3’s, $41b 10’s and $27b 30’s. CPI is out on Wednesday, followed by Powell talking about the labor market to the Economic Club of NY. New high in WTI crude last week, with CLH1 trading over $57/bbl late in the electronic session, and building on gains to 57.50 this morning.
