It’s over
November 6, 2024
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–It’s my solemn hope that I don’t have to watch Mark Cuban lectures any more. Apparently Americans don’t like being talked down to. Congrats to the Frenchman (bad news is that he hedged with bitcoin!). And congrats to Musk who went all-in.
–Yesterday brief summary: Curve flatter and implied vol eased from extended levels. On the SOFR strip SFRU5 and Z5 were both -5 on the day (9621 and 9626.5). Two years further down the strip SFRU7 and Z7 were both +1.5 at 9632.5). 5/30 spread made another new low at 27.8 bps. On June 25 this spread was near its low at 10 bps. After the FOMC on 9/25 it was 61, and it’s been pretty much straight down from there (down over 5 bps today, Tuesday). Buyer yesterday of 35k SFRM5 9725/9825cs for 5.25 (settled 5.0)
–This morning the curve is steeper and bonds are printing 116 (118-05s). I mentioned SFRU5 and SFRZ5, currently 9615.5, -5.5 and 9620.0 -6.0 (4:40 EST). SFRU7 is -10 at 9622.5. So SFRU5 to U7 is close to dis-inverting. Stocks at new highs, but it will be tough to hold those gains with long end yields surging.
–Thirty year auction today. FOMC tomorrow with FFX4 continuing to project a 25 bp cut (9535.75s). I am a bit surprised that Jan FF are printing 9559.0 this morning or 4.41, down just 3. A fed cut this week takes EFFR to 4.58%. I would think that Dec now becomes a 50/50 proposition at best (4.58 or 4.33, and halfway is 4.455, a price of 9554.5). Of course, government spending has kept the US economy looking spritely, and for the short term at least, that’s going to change; the baton will be passed to the private sector.
