Inflation… in WIG20
February 13, 2025
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–CPI sent yields soaring, +0.5% m/m vs expected +0.3. Yoy was 3.0%. Recent peak was Sept 2023 at 3.7%. The yoy low was Sept 2024 at 2.4%. Ten year yield jumped 10 bps to 4.635%. On the SOFR strip, blues (4th year forward) were weakest, -14.5 on the day. Typically, reds (2nd yr) would be weakest on a day like yesterday, but there was actually a bit of steepening in the short end as all contracts give up on the idea of easing, with Powell saying the Fed’s in no hurry while data raises fears of actual rate hikes. Five year note was weakest, up 11.2 bps to 4.482%. Once again, treasury vol was slightly lower, especially in March, which expires one week from tomorrow. As of now, panic about soaring yields is NOT being reflected in treasury premium.
–PPI and 30yr auction today.
–One new trade yesterday that I would note: buyer of 20k SFRU5 9562.5/9537.5 ps for 3.5. Not particularly large, top strike is 20 otm with U5 settling 9582.5. In a bearish market with NO ease, the top strike might be near the money. For example, SFRH5 settled at a new low yesterday of 9568.5. But the Sept put spread really requires a hike to pay off at expiration. Back to SFRH5: the 9568.75 straddle settled 3.75 with 30 days until expiration. Remarkably cheap, given the geopolitical backdrop. It’s as if monetary policy is now iced, while the rest of the world is spinning faster. SFRM5 9575^ settled 15.5 with 121 dte vs 9575.
–This morning as I skimmed news I saw something about WIG20, the Poland equity index. It has gained 18% since the start of the year, supposedly on hopes that the Ukraine conflict is nearing an end. Looked similar to BABA chart (China) so I overlaid that stock price, up nearly 50% since early Jan, but obviously for a much different reason, as China is pulling out all stops to support equities.
on February 14, 2025 at 2:14 am
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insightful