Deterioration
July 19, 2022
–Quiet session in rates Monday. Tens rose about 3 bps to 2.963%. Today’s news includes Housing Starts; yesterday’s Nat’l Association of Home Builders index plunged to 55 from an expected 65, the lowest since 2015. The NY Fed’s Business Leaders Survey shows conditions deteriorating, with expectations rapidly declining. AAPL said it would slow hiring, and perhaps most importantly, Gazprom declared a force majeure and said it cannot guarantee gas supplies to Europe. Nordstream set to come back on line at the end of the week, which is appearing more doubtful.
–The front end of the FF curve settled unchanged with FFQ2 at 9762.5, leaning heavily toward a 75 bp hike that would bring it to 9767 (233 bps). Nov Fed Funds (FFX2) settled 9666.0, so if net week’s meeting does result in 75 bps, FFX2 is essentially 100 bps away, indicating 50 bp hikes in Sept and Nov. Implied vol eased across the rates curve. August treasury options expire Friday, with the atm TYQ 118.5 straddle closing at 60/64’s.
https://www.newyorkfed.org/survey/business_leaders/bls_overview
