Falling Bond Yields
November 17, 2023
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–For the past three sessions, 108-30 to 108-31 proved to be strong resistance in TYZ3, as if there was a large standing sell order at that level. This morning TYZ3 prints 109-05 and appears poised to build on the ripping CPI rally from Tuesday.
–Yesterday, the ten year yield fell 9 bps to 4.443%. On the SOFR curve, March’24/March’25, the most inverted one-year calendar, tested a new recent low at -117.5, but didn’t quite make it, closing down 7.5 on the day at -117 (9477.5/9594.5). However, the one-yr calendars just behind, M4/M5 and U4/U5 did make new recent lows at -109 and -88. The market now seems more hesitant to price aggressive easing in any given period, but rather is stretching perceptions further out the curve, as if the Fed is likely to be stingier with cuts over a longer arc of time.
–While the Dec FOMC is decidedly priced as another pause, the FF curve gives hints for the next couple of meetings. FFF4/FFG4 (Jan/Feb), prices the Jan 31 FOMC and settled -0.5, (9467.0/9467.5) so there is little expectation of ease there. However, FFG4/FFJ4 captures the March 20 FOMC and settled -8 (9467.5/9475.5) so near a 1/3rd chance of a 25 cut priced there. FFF4/FFF5 settled -98.5. Four 25 bp cuts over next year?
–From Cass Transportation yesterday:
The for-hire freight market continues to bounce along the bottom of the economic cycle that started 22 months ago. Shipping volumes hit a cycle low in October. Truckload linehaul rates are at their lowest, and our measurement of the average cost of a shipment, our inferred freight rates, is just above last month’s low point.
–Housing Starts today. Goolsbee speaks at 9:45.
