Fed…stops short?
October 25, 2022
–Composite PMI was just 47.3 vs expected 49.2. Ten year yield +1.3 bps to 4.23%. News today includes Consumer Confidence, Richmond Fed, 2y auction. GOOGL, MSFT, Visa report today. USDCNY is 7.309 this morning, a new low for the Chinese ccy.
–SFRZ2 9575/9587.5cs bought yesterday for 0.75 in size of 100k. Looks to be a new position though prelim open interest sheets have volume of 103k in 9575c and open int increasing by 116k, so something might be off. Call sp settled 0.5 (2.25/1.75) vs 9537.5. Also a new buyer of 20k SFRF3 9512.5/9525/9562.5/9625 c condor. The lower 12.5 wide c spd settled 5.25, while the 9562.5/9625 settled 4.25 vs SFRH3 9510. There is a theme of trying to find cheap call plays for an early end to Fed hikes (as Yellen frets about stability in the treasury market).
–In a related development, the ED curve steepened from reds (2nd year) back: reds +3.0, greens +2.125, blues -1.875, golds -4.375. The 7.375 gain in red/gold pack spread took it to the highest level since early August. The spread is still inverted, at -37.875, but flatteners have been pared back. 5/30 treasury spread settled just above zero. 2/10 is still -27.
