Oil bid
April 2, 2024
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–The May WTI contract (CLK4) hit a high of 84.96 this morning, up 1.25. This eclipses the high from last September. Escalation in mideast hostilities as Israel bombed Iran’s embassy in Syria is a likely contributor. However, US treasuries aren’t really seeing a safety bid, even after a hard sell off yesterday.
–ISM Mfg was stronger than expected, first time above 50 since October 2022. Actual 50.3 vs 48.3 expected. Prices were 55.8 vs 53 expected. New Orders 51.4 vs 49.8….but Employment 47.4 vs 47.5. Eurozone Mfg PMI this morning weak at 46.1.
–Treasury yields soared with tens up 13 bps to 4.329% and 30s up 12.4 bps to 4.467%. On the SOFR strip greens and blues were weakest (3rd and 4th years forward) with SFRM6 through SFRH8 down 15 to 15.5. A few near SOFR calendars made new highs. For example, while SFRM4/M5 is still the most inverted one-year calendar, it made a new high above -100, settling at -98.5 (9482.5/9581.0). SFRM4 was -4 on the day, but M5 was -12.5. Forward contracts continue to squeeze out easing expectations; Powell speaks again tomorrow.
–Today’s news includes JOLTs and Factory Orders. A few Fed speakers: Bowman on Bank Mergers and Acquisitions (important given renewed stress in regionals). Mester on the economic outlook.
