Higher yields to end last week
April 17, 2023
–Friday featured higher yields across the board; slight bear flattener. On the SOFR curve, whites -13.75, reds -13.375, greens -10.625, blues, -9.0 (Note I consider reds to be M4 thru H5; I think BBG has changed it). In treasuries, 2s +12.4 bps to 4.099% and tens +6.5 to 3.517%. Retail Sales were weaker than expected, but selling ensued, a sign of underlying bearishness.
–From Waller’s speech Friday:
Another implication from my outlook and the slow progress lately is that, as of now, monetary policy will need to remain tight for a substantial period of time, and longer than markets anticipate. But there are still more than two weeks until the next FOMC meeting, and I stand ready to adjust my stance based on what we learn about the economy, including about lending conditions
–A couple of larger trades: SFRH4 9606.25 straddle sold from 123 down to 120.5, total 12.5k, new. Settled 121.25 vs 9604.5. Buyer (new) of 50k TYM3 115/116cs for 26. Settled 24 vs 114-275. Ten year note futures saw open interest rise 46k contracts, an increase of ~ 1%.
Chart is Loans & Leases. Still a healthy yoy increase at 9.5%, but the trajectory has changed.
