ECB today. US 2yr near new high
June 9, 2022
–Going into the last few days before June expiration, EDM2 calendars are pressing new highs (EDM2 is pegged and back contracts fell). EDM2/M3 settled 180.25 vs high 182 on April 21. EDM2/U2 settled at a new high 90.75. October Fed Funds settled 9772.5 or 2.275%; if the Fed hikes 50 in June, July and Sept then EFFR will be 233, or a futures price of 9767. The two-year note was 2.772% late, up 4 bps, pretty much matching May 3rd high of move at 2.78%. Tens rose 5.2 bps on auction day, with a yield of 3.024%. CLN2 was at a new high of 122.50 late, obviously keeping pressure on the Fed to DO SOMETHING.
–Today brings the ECB meeting, US Jobless Claims (expected 210k) and the quarterly Z.1 Fed report which highlights debt levels and Household Net Worth. SPX fell 5% from Dec 31 to March 31, so total net worth was likely stagnant. It’s worth taking a look at the summary tables on debt in this report. HouseHold debt doesn’t look all that bad while gov’t debt has exploded. Pre-covid 2019 total HH debt was 16.099T end of 2021 $17.933, up 11.3% over 2 yrs. Total business debt: 2019 $16.283T to 18.541, an increase of 13.8% in 2 yrs. Fed’l gov’t in 2019, $19.040 and at end 2021, $25.314T, an increase of 33%. That’s a huge factor which supported and spurred ‘growth’ and inflation.
–Thirty-year auction also occurs today (re-opening). Yield at futures settle was 3.17%. Tomorrow CPI is released with the headline number expected 8.3%, so that’s a big negative yield on the bond unless inflation starts falling in a hurry.
–A contributor on BBG multi-strat chat noted that WTI priced in yen had taken out the 2008 high, which in dollars was around $145/bbl.
–Implied vol in treasuries rose as yields firmed. TY back to 7% or higher.
