Higher for longer sparks creative incentives
August 28, 2023
–Higher for longer theme in the wake of Powell’s comments. New high SFRU3/U4 -75, up 4 on the day and up from -177 from May 11. SFRZ3/Z4 settled -113.5, also a new recent high.
–Vol hit as futures trading was rather subdued in rates post-Powell. For example, on Thursday TYV 110^ settled 1’55 vs 110-015. On Friday it settled 1’45 vs 109-295 (7.2).
–A fair amount of call buying in SOFR…SFRZ3 9475/9487.5cs paid 1 for 40k… 125k between Thursday and Friday. Z3 9468.75/9481.25/9493.75c fly 0.5 paid 40k. SFRM4 9600/9700cs 9.5 paid 15k and 9700/9750cs 3 to 3.125 (synth) paid for 40k (adding).
–Dallas Fed on Monday, expected -19 from -20.
–Various steps to support markets are becoming more prevalent. In China the MOF halved the stamp duty on securities transactions to 0.05%. Chinese stocks exploded but have fizzled from the highs. USDCNY is near 7.30 with the yuan showing continued signs of weakness (High last November 7.327). In the US, Zillow’s wizards introduced a 1% downpayment program for first time buyers.
