Longer term funding at 3.25%, tens 3.75%
December 28, 2022
–Yields jumped Tuesday with tens at 3.85%, up over 10 from Friday, and 30s nearing 4% at 3.935%. Two year auction well received with a yield of 4.373; fives auctioned this afternoon. SFRZ3 closed -10 on the day at 9551.0. That’s a rate of 4.49% with the FOMC FF projection at 5.1% for end of 2023. In terms of a market ‘lean’ the 9500p settled 28.0 and the 9600c at 32.0. Every SOFR contract from March’25 to March’27 settled between 9671 and 9679. There’s a lot of blather about the ‘terminal rate’ but the market has (for now) decided that something around 3.25% makes sense longer term.
–China re-open is a dominant theme, though I can’t help but think it will come with a new wave of covid sweeping the globe that will hopefully taper by summer.
–TSLA down 11.4% yesterday and down by 2/3rds in the past three months! When collateral backing loans loses value, chain reactions start, and we seem to be in a series of rolling adjustments that should ultimately tighten credit decisions, and beyond that, hiring decisions.
