Focus on FOMC minutes
January 4, 2023
–Today’s news includes ISM Mfg expected 48.5, and FOMC minutes in the afternoon, the latter of which has been hyped as a market mover.
–Atlanta Fed GDP Now revised up to 3.9% for Q4, but a St Louis Fed report flagged by ZH questions whether the US is already in recession by looking at state data (SCI) State Coincident Indexes. The punchline: “So, where are we now? In Oct ’22, 27 states had negative growth in the SCI. That would exceed the six-recession average of 26 states but would fall short of the outlier-adjusted estimate (excluding 2008) of 29.” Just like always, some things are good and some things are bad.
https://www.stlouisfed.org/on-the-economy/2022/dec/are-state-economic-conditions-harbinger-national-recession
–Ever since rallying to -47 a week ago, 2/10 spread has been easing back lower, now -61. Yields generally fell yesterday, with tens down just over 5 bps to 3.788%. Solid rally this morning with TYH up 21.5/64s to 113-10. Yesterday there were a couple of short end trades suggesting the Fed is close to done. SFRM3 9525/9550c 1×2, lower leg bought for credit of 2 bps, settled 13.75/7.5 so credit of 1.25 ref 9504. Also a buyer of >20k SFRG3 9506.25/9518.75/9531.25 c fly which settled 3.5 vs SFRH3 9508.5. Middle strike is target, with a yield of 4.8125. Current EFFR is 4.33. Hike of 25 in Feb with another 25 expected in March would likely benefit the fly.
