Easing pace will be slow, unless FORCED
April 16, 2024
***************
–Stronger than expected Retail Sales helped push yields to new recent highs. On a monthly basis +0.7 vs +0.4 expected, with ex-auto and gas +1.0%.
Two year yield was only up 5.5 bps to 4.935 but tens jumped 13.3 to 4.63% and thirties rose 13.9 to 4.74%. Bear steepener. On the SOFR curve reds were -8.5, while greens, blues and golds were -11.5 to -14.5. The 2-yr note that was issued in January was just over 5% late yesterday; probably a great place to park funds for safety. If not already in gold.
–Buyer of 60k SFRZ4 9850/9900cs for 0.625 synthetic. Settled 1.25 and 0.75 ref 9509.0. Also a buyer of 40k SFRZ4 9700/9800vs which settled 4.75/2.0. Israel/Iran conflict risks significant acceleration.
–Stocks closed at new recent lows. SPX -1.2% and Nasdaq Comp -1.8%. ESM4 late 5099, having erased all of March gains (ESM4 high settle on 3/28 was 5308.5). NQM4 settled 17876.25, down 303, and is also below the entire March range. Sell in May and go away has started a little early this year. Because of climate change, of course.
–Treasuries aren’t really benefiting from a safety bid as of yet. China Q1 GDP was +5.3% but the yuan remains under pressure, and $/yen prints 154.50 this morning (new low for yen). If the BOJ supports the yen it sells US assets. Therefore, the risk trades are in the front end, exemplified by SFRZ4 call spread buys. Once again, I think the Fed’s last SEP, which raised the forward estimates for the FF target in 2025 and 2026, was an important signal which has helped tighten financial conditions internationally.
–Housing Starts and Industrial Production today. Powell speaks at 1:15.
1:15 p.m.
Discussion — Chair Jerome H. Powell
Moderated Discussion with Tiff Macklem, Governor of the Bank of Canada
At the Washington Forum on the Canadian Economy, Washington, D.C.
