Bureau of Weights and Measures
June 11, 2021
–A blockbuster inflation report was met with a shrug, as 5% yoy CPI caused the curve to make new lows and SPX to hit an all-time high. It’s incorrect to say the report “caused” the curve to make new lows, but that’s what occurred in any case. Core CPI was +3.8% yoy. 2/10 spread fell 2.5 bps to just over 130 bps, with 115-120 as next large support level, which would test the trendline from August, when the Fed changed its framework. The ten year yield fell 2.9 bps to 1.457%. A couple of other related notes: the Fed’s RRP operation set a new record of $535 billion, and Household Net Worth rose $5 trillion in Q1, according to Bloomberg. When I look at the Fed’s Z.1 report, I see an increase in net worth of ‘only’ about $4 trillion (maybe Bloomberg is including NFT’s). Just joking about the NFT’s, but according to this link. I see Total Assets at $154.2T vs $150T in Q4, and Total Liabilities $17.2T vs $17T.
https://www.federalreserve.gov/releases/z1/dataviz/z1/balance_sheet/table/
The chart link is revealing as well, as it shows acceleration in ‘assets’.
https://www.federalreserve.gov/releases/z1/dataviz/z1/balance_sheet/chart/
So, assets are levitating in value, while liabilities edge just a tiny bit higher…for households. Government debt has, of course, soared. To me, the conclusion is that the measuring stick, that being the value of the dollar, is suspect. It reminds me of the Tin Man scam, where the salesman would cut a few inches from the center of the old wooden yardstick, glue it back together, and hold his hand over that part when measuring a job. “No one ever checks to see how long a yardstick is.” The record RRP numbers just sort of confirm the idea of A LOT of excess liquidity. I suppose yield levels tell the same story.
–A couple of trades to note: Seller of ~75k 0EU 9975/9950 p spreads at 3.5, settled 3.0 vs 9975.5. Looks like a roll down in strike as OI rose 72k in the 9950p and fell 63k in 9975p. Open interest in the contract fell just under 28k. In tens, pre-data there was a buyer of TYQ 133/132p 1×2 for -1 to +1, settled 3 (43 and 20) with delta of +0.06 as vol was crushed in treasuries.
Can’t find the yardstick scene, but Life Magazine gives the flavor:
