Markets shaken, not stirred
April 3, 2025
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Buy bonds?
–Nasdaq futures had a swing greater than 6% following the start of the tariff announcement, posting a high of 20044 and a low of 18819, 1225 points. For now, asset prices are on the defensive, and of course, there will be forced sales in some cases.
–Rate futures rallied to new recent highs. In this session so far, red SOFR contracts traded up 20 or so. High in SFRU6 has been 9681 (+20.5). After last year’s yen-carry rally (going into the first ease of September 2024) red SOFR contracts traded 9710 to 9725. Currently the front June contract SFRM5 is only +3.5 at 9593 (high of 9597). The market seems to be concluding that the inflation implications of tariffs will keep the Fed sidelined over the near term. I think that assumption is erroneous, but I suppose it will take some time to see if a negative wealth effect materializes. Current equity futures are only -2.8% on ESM at 5554 and -3% on NQM5 at 19165.
–Ten year yield ended at 4.195%, up 3.8 bps yesterday, but flirted with 4% this morning, low of 4.038. Current 4.07. 2/10 ended 29.1 at yesterday’s future settlement time (pre-speech) but is only 28 now. If they thought an ease would be forthcoming, curve would be steeper.
–News today includes Trade Balance, Jobless Claims at 225k, and ISM Services expected 52.9 from 53.5. NFP tomorrow and Powell speaks.
–An article on Reuters: ‘Greek feta producers fret over exports after US tariffs’. Now that’s going to sting.
