NFIB uncertainty index at new high
October 8, 2024
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–Follow-thru front end selling and continued flattening. On the SOFR strip, reds -8.5, greens -5.375, blues -3.625 and golds -3.125. On Oct 1, SFRZ5 settled 9705, yesterday it was -9 at 9557.5, down nearly 50 in four sessions. For comparison, over the same time period, SFRZ7 fell just 30, from 9691.5 to 9662. October midcurves expire Friday, and 0QV4 9662.5 straddle settled 16.5. Seems high. For good reason.
–New recent low in 5/30 at 43.8 bps; it had posted a high of 62 on Sept 25. TYZ4 settled 112-15+, down 11+ while cash tens were up 4.3 bps to 4.024% in front of tomorrow’s auction. Three year today, 30s on Thursday. There was not much evidence of a reach for puts in the long end. ATM TY straddle settled 2’17 (112.5^) from 2’20 Friday (113^). Some profit-taking sales noted in SFRZ4 puts, for example SFRZ4 9550p sold at 4.0 and settled there, 19 bps otm (9569s). The 9593.75 call settled 4.5.
–From Governor Kugler’s speech yesterday:
…my approach to any policy decision will continue to be data dependent and to rely on multiple and diverse sources of data to form my view of how the economy is evolving. For instance, I am closely monitoring the economic effects from Hurricane Helene and from geopolitical events in the Middle East, since these could affect the U.S. economic outlook. If downside risks to employment escalate, it may be appropriate to move policy more quickly to a neutral stance. Alternatively, if incoming data do not provide confidence that inflation is moving sustainably toward 2 percent, it may be appropriate to slow normalization in the policy rate.
–CLX4 was up nearly $3 bbl late at 77.34. Not only are the effects from Helene important to monitor, Milton is now bearing down on Florida. On another note, the Hang Seng index was down ~10% today. China’s stimulus packages had sparked a rally from 17k to 23k, but HSI fell to 21k today. Global volatility.
–Consumer Credit up just $8.9b with Revolving -1.2% annualized. Data from August, but seems surprising given the “roaring” job market.
Today’s news includes NFIB Small Business Optimism….just released; here’s a snippet:
The NFIB Small Business Optimism Index rose by 0.3 points in September to 91.5. This is the 33rd consecutive month below the 50-year average of 98. The Uncertainty Index rose 11 points to 103, the highest reading recorded.
–Trade balance and 3-year auction coming up.
