Expecting (near) hikes, but every contract from EDZ2 to EDU5 is at a successively lower yield
August 9, 2022
–An early stock rally to new highs fizzled. The US curve continued to flatten to new lows, with 2/10 spread down to -46, just 10 away from the 2000 low of -56. The most negative one-year calendar on the ED curve is EDH3/EDH4 at -82.5. The most positive one-year calendar is EDU2/EDU3 which settled 0. Every other 1-yr calendar is inverted out to EDU5/EDU6. Settles: whites +1.5. reds +8.25, greens +9.875, blues +9.875 and golds +9.25. The red gold pack spread fell to a new low -53.625.
–Large buyer (adding) of SFRH3 9625/9600ps for 10, about 20k on the day. Settled 9.75 ref 9641.0
–Implied vol in rates was slightly softer on the day.
–News today includes NFIB Small Business Optimism expected 88 from 89.5. The June report featured this headline: Small Business Expectations for Future Conditions Hits All-Time Low. Hard to sugar coat that. Unit Labor Costs and NonFarm Productivity for Q2 expected -5%.
–3 yr auction today. CPI on Wednesday.
https://www.nfib.com/surveys/small-business-economic-trends/
