Data’s not this week’s catalyst. It’s Geopolitics
November 18, 2024
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–Friday featured a slightly flatter curve in the wake of Powell’s comments Thursday. SFRZ4 -4 at 9554.5, Z5 -1.0 at 9611.5 and Z6 unch’d at 9617.0. 10y yield up 1.4 bps to 4.424%. Odds of an ease at the Dec 18 FOMC are still favored, but being squeezed slightly lower. FFZ4 settled 9548.5, down 2.0. No ease means a final settle at 9542 (EFFR = 4.58) while a 25 bp cut is ~9552.5. So every bp is about 10% of probability. On Friday even Goolsbee, one of the most dovish Fed Presidents, said the dispute on the value of the neutral rate could mean slower rate cuts. The market had already shifted in that direction, but it’s still important to note.
–SPX on Friday touched the halfway mark of the pre to post-election surge. Now it’s all about picking winners and losers of the new policies. Drug companies shed pounds instantly at the announcement of RFK for HHS Sec’y. Banks are bid.
–Biden authorized strikes on Russian targets; dangerous escalation. Putin dangled the carrot of cheap energy to Germany’s Scholz: de-escalation.
–Dept of Defense failed its seventh consecutive audit, but hopes to be able to pass by 2028. There’s a DOGE target.
–It’s a slow week for US economic data. 20y auction on Wednesday. TYZ4 109.5^ expires Friday, settled 0’44 ref 109-17. This morning TYZ4 prints 109-11, continuing the downward trend. Friday’s low is 108-30. TYZ4 109p have 80k in OI (0’09s), 108.5p have 71k (0’03s). TYZ 110c settled 0’10 with 35k open.
