China Stimulus
Sept 24, 2024
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–Curve steepening as the market continues to expect front-loaded easing. Look at this for example: Oct/Feb Fed Fund spread, FFV4/G5 captures 3 FOMCs, Nov 7, Dec 18, Jan 29. It settled yesterday at -110, 9517.5 and 9627.5. Then look at FFG5 to FFG6… that one-year spread is only -91. In other words, the market expects more ease over the next four months than it does over the following YEAR (which contains 8 FOMCs). Pricing remains highly aggressive. FFV4 9617.5. FFG5 9627.5. FFG6 9718.5.
–On the SOFR curve near 1-yr calendars made new recent highs. SFRZ4/Z5 settled -106 (9604.5/9710.5) +1 on the day. SFRZ4 is the lowest contract at the front end of curve and SFRZ5 is now at the apex. Ten year yield edged higher, +1.6 bps to 3.738%.
–BBG: China Unleashes Stimulus Package to Revive Economy, Markets. [rate cuts, measures to boost property]
This morning oil is responding with CLX4 +1.77 at 72.14. Copper also trading at highest level since mid-July. US treasuries are softer across the board; US bond contract down nearly a point at 124-07. US stocks modestly bid.
–S&P Mfg PMI was dismal at 47.0 vs 48.5 expected. Services were solid at 55.4 vs 55.2 exp. Today brings Philly Fed Services, expected -9.3 vs -25.1 last. Consumer Confidence as well. Two-yr auction.
–There used to be a guy who compiled an economic Vice Index. He used data on street drug prices, prostitution and alcohol sales (and maybe other data points) as a leading indicator. Well, as we say, history rhymes, and the Star is running this headline: ‘Economics expert, 20, uses her sex-work experience to predict the next recession’. Amelia Lynne calls it the ‘Stripper Index’ and says “Sex work is typically something that’s cut out before everything else; people will stop going to the club and spending cash there.” adding, “It’s been a really slow month in the US.”
