EDH2/EDH3 exceeds 100 bps
January 11, 2022
–Powell’s prepared remarks for today’s appearance in support of his re-nomination were released yesterday afternoon:
The economy has rapidly gained strength despite the ongoing pandemic, giving rise to persistent supply and demand imbalances and bottlenecks, and thus to elevated inflation. We know that high inflation exacts a toll, particularly for those less able to meet the higher costs of essentials like food, housing, and transportation. We are strongly committed to achieving our statutory goals of maximum employment and price stability.
His main concern has shifted from employment for the less well-off to the negative effects of inflation on budgets.
–Goldman called for four hikes this year, Dimon one-upped them. EDH2/EDH3 made a new cycle high, finally exceeding 100 bps at 101.5, up 3 on the day. EDM2/EDM3 also closed at a new high of 93.5, up 2. April Fed Funds fully capture the March FOMC result. FFJ2 settled 9969.5 or 30.5 bps. The average Fed Effective rate to which the contract settles has been 8 since the start of December. Therefore, 22.5 bps of a potential March move is priced. Slight new low in 5/30 at 57.2, as the idea of front-loaded hikes supports the long end. Implied vol in treasuries eased as the morning’s initial selling pressure in TY abated.
–There has been consistent selling pressure on FVH futures, with an additional exit of 25k FVG 120.25c yesterday at 3.5. FVH settled 119-18; the cash yield rose 3.5 bps to 1.537%. Today the treasury auctions $52 billion 3-yr notes, followed by 10s and 30s Wed and Thursday.
