Oh it was just a lucky guess
August 8, 2023
–New recent highs in some of the treasury curve spreads. For example 5/30 is almost +11 bps having been -35 one month ago on July 6. 10/30 is around +18 from -3.6 on July 6. Yields across the curve were mixed, with 2y -3.3 bps to 4.756, 5y -1.5 to 4.148, 10y +1.6 to 4.074 and 30y +4.5 to 4.256.
–Large new buyer 22k TY week2 111.5/112.5cs for 15. Settled 16 ref 111-04. This morning the lower strike is in the money with TYU 111-185. What did you know? That Moody’s was going to downgrade small banks? That China’s exports (FT) “suffer the worst fall since start of pandemic”? That June’s Consumer Credit would show a decline in revolving? From the Cons Credit report by the Fed:
Revolving credit increased at an annual rate of 7.1 percent, while nonrevolving credit increased at an annual rate of 3 percent.
So, revolving credit at 3 pct is not keeping up with inflation. What does that say about retail in general? There’s been a lot of iffy news on the economic front, and the nearly 10% drop in AAPL (to yesterday’s low) is there for anyone to see. There’s also a snippet on ZH that more of China’s LGFVs (Local Gov’t Financing Vehicles) are missing payments on commercial paper. Amounts don’t seem to be that large, but perhaps it’s a prelude to US corporate debt which will need to be rolled in the next year or so.
The thing to remember is that there’s always someone out there with better info than you have.
–Auctions kick off today starting with $42b 3-yr. 10s tomorrow.
–Attached chart is 10/30 yield spread in violet and SFRU6/SFRU7 in gold. Back end of the SOFR curve has been steepening with blue pack (4th yr) +1.75 yesterday and gold pack (5th) -0.125. Blues/golds track 10/30 fairly well.
