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June 19, 2023

–Friday featured new recent high SFRU3/SFRU4 at -124 (9469/9593).  SFRZ3/Z4 still most inverted 1-yr at -142.5 (9481.5/9624) as Fed dots indicate 100 bps of ease over 2024 (5.6 to 4.6 FF target).  Longer curve measures made new lows: 2/10 treasury spread at -95.6 and 5/30 at -14.4.  

–Powell hones his message in front of Congress this week, House on Wednesday and Senate on Thursday.

–On Friday the NY Fed [Liberty Street Econ] released its DSGE Model Forecast.  Which, as everyone knows, stands for Dynamic Stochastic General Equilibrium. (duh) It revised growth estimates sharply higher…but cited just ONE factor: “SPF [survey of professional forecasters] long-term inflation expectations have dropped by about 45 bps in Q1 23, relative to Q3 2022, a very large change by historical standards.”

Asked for further clarification, a representative from the NY Fed said, “Dude, it’s just a model.”

Appears to be in sync with NY Fed’s UIG, below 

From the NY Fed Underlying Inflation Gauge:

The UIG “full data set” measure for May is currently estimated at 3.5%, a 0.5 percentage point decrease from the current estimate of the previous month.

The “prices-only” measure for May is currently estimated at 3.0%, a 0.4 percentage point decrease from the current estimate of the previous month.

To the untrained eye, it certainly LOOKS like a turn…

https://www.newyorkfed.org/research/policy/underlying-inflation-gauge

Posted on June 19, 2023 at 5:59 am by alex · Permalink
In: Eurodollar Options

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