Bonds tentatively embrace the QT reduction
March 21, 2025
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–Yields slightly lower yesterday with 2s, 5s and 10s down around 2.5 bps to 3.853%, 4.005% and 4.231%. Same on the SOFR strip with all contracts in the first 4 years up 2 to 3.5. Peak contract remains SFRU6 at 9652 (3.48%).
–Sev’l large treasury option trades. Pre-open exit seller of 50k FVJ 108.0c at 7 (April expires today, FVM5 settled 108-005). During the day replacement buys of 50k FVK 110c for 6.5 early, then up to 8 for another 50k. DV01 is approx $44 on the contract, 2 points out of the money, call it 45 bps away for the 110 strike. Somewhere around 3.55% on current 5y (DV01 is $44.4 per $100k). Other decent size buys in TY calls as well, for example TYK 112.5c 31 paid vs 111-14. Open interest up 19k, settled 25 ref 111-055. Total OI in FV futures +11k and in TY +53k.
–There has been a decent move in Accenture (ACN). On February 5, high of 398.25. Yesterday slammed and closed 300.91. So that’s right around an even 25% loss in a month-and-a-half. No big deal…it’s just a single company, but what I found interesting is that they blamed a slowdown in Gov’t work. …”federal services accounted for about 8% of its global revenue and about 16% of its Americas revenue in the 2024 fiscal year.”
According to Google: “In 2024, federal government spending was approximately 23.1%
of the Gross Domestic Product (GDP), while federal receipts (revenue) were around 16.8% of GDP.
–If one company, where the revenue derived from gov’t isn’t even near the Fed govt share of GDP, can be hammered, how about everyone else? Btw FedEx also crushed post-earnings, down 8% to a new low this morning. Big quarterly OpEx today in stocks.
https://blinks.bloomberg.com/news/stories/STFF5HT0G1KW
This link is for the Treasury General Account. Mentioned several times by Powell at press conference in terms of liquidity impact.
https://fred.stlouisfed.org/series/WTREGEN
