No inflation…if you pay in etherium
May 4, 2021
–Yields eased Monday with tens down 2.2 bps to 1.606%. Mfg ISM was lower than expected at 60.7 vs 65, but Prices Paid at 89.6 was near an all-time high. A headline from WSJ proclaims ‘Auto Makers Retreat from Just-In-Time Manufacturing’. I don’t know the details of the story, but I do know that just-in-time was pioneered by Japanese makers to enhance efficiency and keep prices low. With supply bottlenecks, holding inventory as insurance becomes more important than price efficiencies. At the margin, it’s a non-transitory change in behavior that supports inflation.
–Although EDU’24, blue Sept, was +4 on the day to 9848.5, there continues to be buyers of put spreads vs call spreads on the contract. The downside piece is the 9837.5/9812.5 put spread which settled 7.25, while the call spread yesterday was 9887/9925 which settled 4.75. This package only traded about 12k, but the flow remains consistent.
–Today’s news includes Durables, and Mary Daly of the SF Fed speaks at 1:00 at the Economic Club of Minnesota. She has previously indicated that an increase in asset values is irrelevant if an offshoot of policies that help employment. Etherium was 1700 at the end of March, and is now 3350 into the first couple of days of May.
–Treasury released financing estimates, expecting to borrow $463 billion in the current April to June quarter. That borrowing estimate is $368 billion higher than estimated in February, because… COVID. A fudge factor of over $350B in two month’s time! And in the July to Sept quarter the estimate is $821 billion. (But it will only be half that much in etherium).
https://home.treasury.gov/news/press-releases/jy0158
