Inflation expectations have risen. What will CPI say.
February 12, 2025
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–Not much reaction to Powell’s appearance. Yields ended higher on the day with tens up 4.2 bps to 4.535% in front of today’s CPI data and 10y auction. Three year auction was solid at 4.30%. Odds for an ease in March (and beyond) are being squeezed out. Current SOFRRATE is 4.35% or a price on 9565 (ignoring daily compounding). SFRH5 settled -0.5 at 9570.5, while SFRM5 settled 9581.0, down 2 on the day. April Fed Funds are 9568.5 against a Fed Effective of 4.33% or 9567. Peak SOFR contract is SFRU6 at 9604.0 or 3.96%.
–CPI expected 0.3 both headline and core m/m. Yoy 2.9% from 2.9 last, with Core 3.1 from 3.2 last. Whisper numbers appear to tilt higher. Long maturity treasury futures are currently unch’d from yesterday’s settles.
–Late new buyer 37k TYH5 109.75/110.5cs for 6 ref 108-31. Settled 6 ref 108-30+ (8 & 2). Also buyer 20k TYH 109p 18 to 20. Someone seems to be jobbing around 20k clips of 109 puts. In any case, settled 28 with futures 108-30+. TYH5 109 straddle expires one week from Friday and closed 0’53, which I calculate just under 13 bps. For a rough comparison, blue Feb midcurves expire this Friday. SFRH8 settled 9597 and the 9600^ settled 10.5. Slightly cheap in my opinion.
