Calm before the storm
October 9, 2024
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–Little change in rates Tuesday as selling pressure related to NFP abated. SFRH5 settled 9609, +3.0, the strongest contract on the strip. Every contract on the SOFR strip from SFRZ5 to SFRZ7 is between 9660 and 9666. In fact, Z5 is 9660 and Z7 is 9661, a spread of just -1. On June 26 this spread was -35.5 (9599/9634.5). Three months later on Sept 25 the spread hit a high of +24.5 as prices flipped (9710/9685.5) due to perceptions of front-loaded easing. Now what? Which to buy and which to sell? Ginger, or Mary Ann? One thing you can’t go wrong with: Dec Wheat. Popping over $6 this morning, looks ready to run.
–FOMC minutes today, following the 10y auction. At the futures close, 10y WI was 4.033. On July 1 the yield was 4.463%. On 9/16, just two days before the FOMC it was 3.62%.
–CLX4 erased Monday’s rally, down 3.26 bbl yesterday at 73.88. Many markets are spiking and fading.
–Boeing at risk of being cut to junk by both Moody’s and S&P. Google at risk of being broken up by the Federal Gov’t (according to FT). Florida facing a dire storm. Against this backdrop, a pillar of American consumerism, the french fry, is also under assault:
Lamb Weston, the largest producer of french fries in North America and a major supplier to fast-food chains, restaurants and grocery stores, is closing a production plant in Washington state. The company announced last week that it would lay off nearly 400 employees, or 4% of its workforce, and temporarily cut production lines in response to slowing customer demand.
https://www.cnn.com/2024/10/08/business/mcdonalds-french-fries-lamb-weston/index.html
–They can tell you the economy is great, that confidence is up, and that jobs are plentiful. “You want fries with that?”
–A post on X: “Elon Musk says he would like to fire about 80% of the federal government while working with Donald Trump.”
There’s a widespread belief that a Trump admin would blow out (the already shattered) budget, just like Harris. Gov’t spending has had the major supporting role, or, make it the lead role, in creating economic activity. Maybe those assumptions need to be examined more closely.
