February: a month of paring back ease expectations
February 27, 2024
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–Price concession allowed the market to absorb two and five year auctions, and contributed to new recent lows in the curve. 2/10 closed -44, down about 1 bp. Red/green SOFR pack settled near -28, down nearly 2 bps on the day. The 2y and red SOFR pack both rose 5 bps in yield; 2y to 4.735% and Red pack to 9601.625. In early February, the peak contract on the SOFR strip was SFRZ’25, which settled 9687.0 on 1-Feb. Yesterday that contract settled 9623.0 (down 64 from Feb 1), and the peak contract has moved over a year further back in time to SFRH’27 at 9631.5. Just another reflection of eases being squeezed out and the curve flattening. Currently, every SOFR contract from Dec’25 through Dec’28 is between 9622.5 and 9631.5, right around 3.75%. The lowest contract is still SFRH’24, which made a new recent low yesterday of 9467.
–Japan’s inflation data showed Core Prices +2.0% in Jan, down from 2.3% in December but higher than the 1.8% expectation. BOJ expected to end negative rates in March or April.
–7 year auction today, $42b. Yesterday the 10y rose 4 bps to 4.295%. Durables and Consumer Confidence, amid more reports that consumers are trading down in terms of brands and generally being more frugal. Confidence expected 115 from 114.8. The administration seems desperate to get out the message that the economy is doing great (with the implicit undertone that only the stupid can’t see it).
–Interesting line by Matt Taibbi yesterday (Nikki Haley’s $100 million faceplant)
“All of this speaks to one of the major unreported stories of our time: a dramatic political realignment by income and class, presented as a schism between smart and ignorant, ‘normal’ and not.”
