Flatter curve
November 11, 2024
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–Veteran’s Day. Cash bonds are closed. CME should be but isn’t.
–Friday was a flattener trade on light volume. On SOFR strip weakest contract was SFRM5 which closed -6 at 9600 or 4%. Red SOFR contracts (2nd year forward) were -2.75 with an average price of 9622.25 while greens (3rd yr) were up on the day, only by 0.5, to 9626.875. Two year note up 3.6 bps to 4.25%, tens were down in yield by an equal amount, to 4.304%. New low in 2/10 spread at 5.4, just holding positive as the market perceives a much less generous Fed.
–New highs in stocks to start the week. Bitcoin explosion continues, now 82k. Rate futures lower. USD higher, Oil and gold down.
–Gundlach on CNBC Thursday made interesting comments about the Fed “truing up” with the 2-yr note. He mentioned that since September, FF have fallen by 75 bps while the two-yr note yield has risen (now UP about 70 bps since just prior to the Sept FOMC, a swing of over 140 bps. He joined with Druckenmiller and PTJ in saying that he would avoid buying long bonds due to supply concerns. Link below.
–I haven’t read it yet, but the FT has a lead article today: Is Chicago’s Don Wilson the smartest man in trading?
