Bitcoin up/ Gold down / School’s out
November 12, 2024
*********************
–Light volume as treasuries were closed. Flattening bias with SOFR reds down 7.5 but greens -7.125 and blues -6.25.
–Bitcoin explosion with Dec futures up over 10k late to 88300. Precious metals went the other way as DXY continues to rally. DXY now near 106. Dec Gold down nearly $15 this morning at 2603/oz. DXY 105.87.
–Buyer of about 30k SFRH5 9600/9625/9637.5 broken call fly for 3.5 to 3.75, even as odds for more Fed easing are squeezed out (SFRH5 settle 9578). FFG5 which captures both Dec and Jan FOMC meetings settled 9566.5, down 2. That ‘s a rate of 4.335; new EFFR is 4.58 so looking for just one more ease over two meetings. Actually. a bit more priced for the Dec 18 meeting than Jan 29; FFF5/FFG5 settled -7.5 (9559/9566.5).
–NFIB and SLOOS today. NFIB just out at 93.7, but these are pre-election surveys. There are several Fed speakers, most important is Waller at 10, but he’s talking about payments.
–Trump to dismantle the national Education department. He says results can’t get much worse and is probably right.
Flatter curve
November 11, 2024
*********************
–Veteran’s Day. Cash bonds are closed. CME should be but isn’t.
–Friday was a flattener trade on light volume. On SOFR strip weakest contract was SFRM5 which closed -6 at 9600 or 4%. Red SOFR contracts (2nd year forward) were -2.75 with an average price of 9622.25 while greens (3rd yr) were up on the day, only by 0.5, to 9626.875. Two year note up 3.6 bps to 4.25%, tens were down in yield by an equal amount, to 4.304%. New low in 2/10 spread at 5.4, just holding positive as the market perceives a much less generous Fed.
–New highs in stocks to start the week. Bitcoin explosion continues, now 82k. Rate futures lower. USD higher, Oil and gold down.
–Gundlach on CNBC Thursday made interesting comments about the Fed “truing up” with the 2-yr note. He mentioned that since September, FF have fallen by 75 bps while the two-yr note yield has risen (now UP about 70 bps since just prior to the Sept FOMC, a swing of over 140 bps. He joined with Druckenmiller and PTJ in saying that he would avoid buying long bonds due to supply concerns. Link below.
–I haven’t read it yet, but the FT has a lead article today: Is Chicago’s Don Wilson the smartest man in trading?
Post Election and FOMC
November 10, 2024 – Weekly Comment
*******************************************
Following the FOMC’s 25 bp cut and Trump’s sweep, SFRZ4 closed on the low at 9557.5 or 4.425%. After Thursday’s Fed cut, EFFR is 4.58 or 9542. So SFRZ4 is only 15 away from EFFR. SFRZ4/H5 spread closed at a new high of -24 (9557.5/9581.5). Roughly looking at just one ease in Q1. FFG5, which captures Dec and Jan FOMCs, settled 9568.5 or 4.315%, just 26.5 bps under EFFR; 1 cut.
The table below is a bit hard to see, but focus on the red and blue shaded areas. The contracts are SOFR, for the first four years, whites, reds, greens, blues. The start date is October 16 (random start date, about 3.5 weeks ago). The red shade represents the lowest contract/highest yield on the strip: SFRZ4 (from 9566.5 to 9557.5). The blue shade is the peak price on the strip. One might roughly equate it to the terminal rate. As the peak (blue) moves closer in time, it gives a rough measure of how aggressive the Fed is going to be in terms of easing policy. A week ago it appeared, from this table, as if the Fed would be done easing in about a year and a half.
A couple of things to note. The peak on Oct 16 was the third red at 9671.5 or 3.285%. The next week on Oct 24 it had moved closer in terms of time, to the second red slot, (SFRH6) at 9651.5. On Oct 16 the spread from lowest to highest was -105 bps. On Oct 24, -90. On Friday, the peak contract moved all the way back to the third green, SFRU7, at a price of 9628 or 3.72%. The lowest/highest spread is just -70.5 and covers a lot more time. All contracts from SFRH6 to SFRH9 settled between 9622 and 9627.5. Rough terminal rate of 3.75%.
I hope the market is wrong, because that could bring a boring few years for SOFR. What does this limited data set tell us about market sentiment? Whether the Fed articulates it or not (and Powell speaks on Econ Outlook again on Thursday) it will be leaning against stimulus measures by the new administration and rates will generally be higher.
So why did the treasury curve flatten? I think a lot was vol/long put related. Consider the charts below. The top is over a six-month time frame. Since the FOMC on Sept 18, yields moved significantly higher. Market sentiment shifted to fears of unsustainable deficits and re-acceleration of inflation. Going into the election, bearish bets on the long end were expressed by heavy demand for puts. The huge rise in the MOVE index bears this out. With both the election and the FOMC decided, there was a huge decline in MOVE. Put liquidation. Which sparked a yield decline into Friday. The curve flattened as the Fed is expected to be in more of a wait-and-see posture. The chart on the next page shows that dynamic. Five-yr yield fell, but not nearly as much as 30s. Does the yield drop Friday portend a change in trend? Doesn’t look like it to me.
One other thing to notice on chart above: my friend Totman is always pointing out the correlation of $/yen to US yields. It’s obvious on the six-month chart, with $/yen in red. While global yields mostly fell late in the week, JGBs didn’t. Before the “yen-carry” debacle in early August, the 10y JGB had reached a high of 1.09 in July. In mid-August it hit 78 bps as the BOJ calmed the market, then chopped around before the latest run from 81 to 100 bps post-FOMC. Same with the 20y JGB: 1.94 in July, 1.62 right before the FOMC, now 1.83. $/yen in July 161.70. Just before Fed 140.62. Now 152.64. A further rise in JGB yields could siphon away some demand for USTs.
The chart below covers a one-year time frame and shows the 5y and 30y yields in the top panel, with the spread in the lower panel. Last two FOMC meetings marked with purple vertical lines. The 50 bp ease almost exactly marked the bottom in treasury yields. The spread declined/flattened. The market appears to be telegraphing a less accommodative Fed (just as the SOFR table above shows). Five-year note yield ended the week at 4.19%. Still about 40 bps underneath funding rates. However, SFRH5 is 9581.5 or 4.185% and SFRM5 is 9600.0 or 4%. If inflation stays around these levels and the Fed cuts a couple more times into Q2, then it will be a lot easier for the Treasury to place debt, as the US banking system will likely absorb a larger share of issuance.
News this week includes NFIB optimism on Tuesday…but this survey was done pre-election.
CPI Wednesday, PPI Thurs and Retail Sales Friday, but again, data may change quickly going forward. Powell speaks on Economic Outlook on Thursday.
The Fed’s quarterly Sr Loan Officer Opinion Survey (SLOOS) is Tuesday. The last report from July indicated modest tightening, though most banks/categories were unchanged. About 60 banks participate, 20 are large banks.
Home Depot (HD) reports on Tuesday. I was surprised to see a BBG article which says that same store sales have declined for 8 straight quarters (following the Covid surge). Pretty tough to do given inflation.
| 11/1/2024 | 11/8/2024 | chg | ||
| UST 2Y | 419.7 | 425.0 | 5.3 | |
| UST 5Y | 420.6 | 419.0 | -1.6 | |
| UST 10Y | 435.5 | 430.4 | -5.1 | |
| UST 30Y | 455.5 | 447.6 | -7.9 | |
| GERM 2Y | 224.7 | 218.5 | -6.2 | |
| GERM 10Y | 240.5 | 236.7 | -3.8 | |
| JPN 20Y | 177.7 | 183.1 | 5.4 | |
| CHINA 10Y | 214.3 | 210.7 | -3.6 | |
| SOFR Z4/Z5 | -67.0 | -60.5 | 6.5 | |
| SOFR Z5/Z6 | 1.0 | -7.5 | -8.5 | |
| SOFR Z6/Z7 | 2.5 | -2.0 | -4.5 | |
| EUR | 108.35 | 107.20 | -1.15 | |
| CRUDE (CLZ4) | 69.49 | 70.38 | 0.89 | |
| SPX | 5728.80 | 5995.54 | 266.74 | 4.7% |
| VIX | 21.88 | 14.94 | -6.94 | |
Settling in for higher terminal rates
November 8, 2024
*******************
-Fed cut 25 as expected, so EFFR should now be 4.58% (from 4.83%). Jan FF contract settled 9560.5, +0.5 on the day, or 4.395%, so the spread to the new EFFR is -18.5, i.e. about 75% chance of another 25 bp cut in Dec. FFG5, which also captures the Jan 29 FOMC, settled 9570 or 4.3%. It’s somewhat surprising, given the surge in equities post-election, that rate cut expectations remain fairly well entrenched. However forward rates remain stifled. SFRZ4 settled 9559.5. The highest contract on the strip is now SFRM6 at 9626.5, a spread of just -67 to front Dec. On Oct 1, SFRM6 was 9708 and SFRZ4 was 9597.5, a spread of -110.5. Every SOFR contract over the three year span from Z’25 to U’28 is between 9622 and 9626.5, about 3.75%. I had thought a ‘terminal rate’ would be about 2.75% in this cycle, which was around the high in Trump’s first term in 2018. Either I am wrong, or it’s worth looking at long-dated call spreads in SOFR.
–Premium across rate futures continues to compress, accentuated by the countertrend rally in bonds. On Monday the Jan atm US straddle was 5’22 ref 117-28 (30y yield 4.494). Yesterday, the Jan US atm 117 straddle settled 4’10, with futures just 20 lower than Monday at 117-08 and cash yield of 4.543. Similar story in SOFR. On Monday SFRU5 9625^ settled 81.5 vs 9626. Yesterday SFRU5 9612.5^ settled 74.0 vs 9616.5. Ten year yield fell 8.5 bps 4.341%.
–Today brings U of M sentiment and inflation expectations. All polls are now taken with a grain of salt. Next week CPI Wednesday and Retail Sales Friday. Powell speaks on Thursday.
Front runners
November 7, 2024
********************
–FFX4 are locked-in for a 25 bp ease today. A cut will take EFFR from current 4.83% to 4.58%. The Jan FF contract prices the Dec 18 FOMC. It currently is 9560 or 4.40%. If, after today, the Fed holds at 4.58, then FFF5 goes to 9542.0, or 18 lower. On another 25 bp cut it goes to 4.33 or 9567.0 (ignoring the Jan 29 FOMC). Obviously, the lean is for another cut after today. Note that it was after the 50 bp cut in September that longer treasuries began their slide.
There’s a Reuters headline today:
‘China’s exports soar past forecast as factories front-run Trump tariff threat’
There’s a lot of front-running going on right now in markets. The other day I joked that on the Sept-18 50 bp cut, ten year yields ultimately soared by about 65-70 bps. Same magnitude after a 25 cut today should spark a move of about 30 to 35 bps. I had marked tens at 4.36% on Friday and suggested perhaps 4.70% should be the target. Got a bit of a front-running head start yesterday with 10y +13.7 to 4.426. The curve steepened with 2s only +6.5 to 4.266%.
–Having said that, I am looking for long-end rate futures to bounce, at least temporarily. Implied vol was crushed in the past 2 days, and demand for the 30-yr auction was strong, posting a result 2.2 bps through at 4.608% on bid-to-cover 2.64. A friend said, “well that’s no surprise given the 20 bp yield back-up” (30s +15.2 yesterday to 4.60%). But that’s the point: the yield rise brings in buyers, i.e. support.
–To give an idea of the vol move, there was an exit block yesterday: TYZ4 109.5p covered 109-12, 54 delta, seller of 17k at 46.
On Tuesday. TYZ4 109.5p settled 33 with a delta of 34 against 110-13. Change in futures of 1’01 or 65/64s should have caused the put to be around 56. But it traded 46. Long puts did NOT perform. Long puts hedged were a disaster. TYZ4 109.5p settled 40 ref 109-175. Open interest fell 11.5k
–There were a lot of big trades yesterday. I am just going to mention a few option trades on SFRZ5, which settled -10 at 9616.5 and had the largest change in open interest at +78k. SFRZ5 9875c 2.5 paid for 30k, new position. These are 259 bps out-of-money. Z5 9325/9275ps 0.75 paid for 50k (new). Top strike 291 otm. Settled 0.75. Z5 9575/9550ps covered 9615.5, 8d, buyer of 40k 7.75 (new, settled 7.5).
The Fed’s September end-of-2025 FF projection was 3.4% or 9660. Exactly one month ago on Oct 7, SFRZ5 settled 9657.5, and on Oct 8 at 9660. Right on target. We now see that the Fed’s guidance, much like that of professional pollsters, has been discredited. In fact, on Sept 10, SFRZ5 settled 9720, so we’ve travelled 100 bps in two months. Maybe the otm stuff in Z5 isn’t so crazy!
–Powell’s future: From the Fed website: Powell’s new term as Chair ends on May 15, 2026.
–Yesterday I mentioned the Frenchman who bet correctly on Trump. In case missed the original story:
Polymarket’s French Whale Scores a $48 Million Trump Jackpot
2024-11-06 17:50:36.537 GMT
By Emily Nicolle and Max Harlow
(Bloomberg) — Many people involved in crypto markets had
reason to gloat on Wednesday about Donald Trump’s win, but one
closely watched French trader’s bets are poised to pay out
millions of dollars on the election’s outcome.
The pseudonymous trader — known best as Fredi9999, the
username of one of his four known accounts on the Polymarket
predictions platform — is expected to haul in a total profit of
around $48 million on the results of the election, according to
calculations made by Bloomberg.
In the platform’s most-popular market, where users bet on
which candidate will be the next president, the four accounts
will net around $22 million, Polymarket data showed on Wednesday
morning in New York. Another $26 million was the result of other
bets related to the election, such as Trump winning the popular
vote or winning Pennsylvania. Two of the trader’s accounts rank
first and second place as Polymarket’s most-profitable users of
all time.
Scrutiny of Fredi9999’s trading patterns ramped up in
recent weeks as his bets ranked among the largest wagers on
Polymarket’s presidential markets, prompting concerns of
possible market manipulation. Following an investigation,
Polymarket said the person behind the four accounts is a French
national with extensive experience in financial services, who
simply wished to bet on Trump’s chances.
Read More: Polymarket Says Trump Whale Identified as French
Trader
On Polymarket, which does not permit US users, traders use
cryptocurrency to buy what it calls “yes” or “no” shares
tracking outcomes of future events. The amount of buying and
selling of those instruments then determines the implied
probability of each outcome at any point in time. The platform
displays profits under each account’s positions, which represent
the difference between the price of the shares when they were
bought and $1.
While polls had been showing a neck-and-neck race between
Trump and his Democrat rival Kamala Harris in the days leading
up to the vote, betting markets swung heavily in favor of the
Republican. Polymarket had been a particular favorite for Trump
supporters, often displaying probabilities of his victory that
were several percentage points higher than other prediction
markets.
Read More: Betting Markets, Vindicated by Trump Win, Set to
‘Run the World’
In comments published by his accounts on Polymarket, the
trader described himself as a European investor, statistician
and “big gambler” who was willing to bet millions on Trump’s
chances. “A land of the free, a home of the brave, not a KAMALA
LA LAND. She is WEAK!!” he wrote on Oct. 6.
The trader said in other comments that he viewed most
traditional polls with caution, given how outcomes were
misjudged in previous presidential elections. Instead,
prediction markets offered the best risk versus reward. Even
then, Polymarket wasn’t his preferred way to wager, just a
portion of his bets, he said.
“Best play is Bitcoin,” the trader said on Oct. 18. “So do
you think that I care about manipulation the odds here ??”
To contact the reporters on this story:
Emily Nicolle in London at enicolle@bloomberg.net;
Max Harlow in London at mharlow4@bloomberg.net
To contact the editors responsible for this story:
stacy-marie ishmael at sishmael@bloomberg.net
Anna Irrera, Michael P. Regan
To view this story in Bloomberg click here:
https://blinks.bloomberg.com/news/stories/SMJ7XQDWRGG0
It’s over
November 6, 2024
********************
–It’s my solemn hope that I don’t have to watch Mark Cuban lectures any more. Apparently Americans don’t like being talked down to. Congrats to the Frenchman (bad news is that he hedged with bitcoin!). And congrats to Musk who went all-in.
–Yesterday brief summary: Curve flatter and implied vol eased from extended levels. On the SOFR strip SFRU5 and Z5 were both -5 on the day (9621 and 9626.5). Two years further down the strip SFRU7 and Z7 were both +1.5 at 9632.5). 5/30 spread made another new low at 27.8 bps. On June 25 this spread was near its low at 10 bps. After the FOMC on 9/25 it was 61, and it’s been pretty much straight down from there (down over 5 bps today, Tuesday). Buyer yesterday of 35k SFRM5 9725/9825cs for 5.25 (settled 5.0)
–This morning the curve is steeper and bonds are printing 116 (118-05s). I mentioned SFRU5 and SFRZ5, currently 9615.5, -5.5 and 9620.0 -6.0 (4:40 EST). SFRU7 is -10 at 9622.5. So SFRU5 to U7 is close to dis-inverting. Stocks at new highs, but it will be tough to hold those gains with long end yields surging.
–Thirty year auction today. FOMC tomorrow with FFX4 continuing to project a 25 bp cut (9535.75s). I am a bit surprised that Jan FF are printing 9559.0 this morning or 4.41, down just 3. A fed cut this week takes EFFR to 4.58%. I would think that Dec now becomes a 50/50 proposition at best (4.58 or 4.33, and halfway is 4.455, a price of 9554.5). Of course, government spending has kept the US economy looking spritely, and for the short term at least, that’s going to change; the baton will be passed to the private sector.
Bonds and oil bid this morning
November 4, 2024
*******************
(As of 5:45am EST)
–Rate futures closed out the week on the lows, though Friday’s rate moves have been completely erased this morning. Tens closed Friday +7.7 bps at 4.355%; now 4.29%. Red sofr contracts were -4 with SFRZ5 9630. At the end of September this contract settled 9700. SFRZ4/Z5 one-yr calendar settled at a new high -67. On Sept 11, just prior to last FOMC, it was -132. Auctions of 3s, 10s and 30s start today, $58b 3yr today.
–Election and FOMC this week. WTI CLZ4 is up around $2/bbl as of this note at 71.48. CLZ4/Z5 calendar has moved from a premium of around $2 for the Z4 contract to around $3 this morning. Strong demand for near otm calls; skew bid (chart). Just a reminder that geopolitical concerns also loom large.
Felection
November 3, 2024
*******************
It’s FOMC week and the election: Felection. Sound stupid? It’s supposed to.
In the old days, there was no Fed statement. No press conference. There were legions of “Fed watchers” who interpreted policy moves. On the CBOT floor, “Fed time” was around 10:30 to 10:35. Repos or matched sales were big clues on policy.
Elections were pretty much counted and known. Now we have legions of election watchers and we probably won’t know who won for days.
Image is global long-end yields. Last October the refunding announcement favoring t-bills as the financing choice, sparked a yield drop in tens. This October yields have risen.
I just don’t know how to handicap the election. What I do know is that the 10-yr yield rose about 65 bps since the 50 bp ease in September (as the above chart shows). The Nov FF contract is locked in on another 25 for this meeting. So, if we hold true to form, by the end of November the 10y should be about 30 to 35 higher, right? The current 10y is 4.36%. The irony of another Fed cut that spurs long-end selling would put the 10y yield right around 4.70%. A Fed cut takes EFFR to 4.58 and there would be positive carry on tens, a helpful condition in terms of placing debt.
FFX4, November Fed Funds, settled 9535.75. I calculate an ease of 25 will obtain final settlement of 9536.2. FFF5, Jan FF, settled 9563.5. Jan is not a “clean” month, as the first FOMC meeting of the year is Jan 29. Current EFFR is 4.83%. A cut this week takes it to 4.58% and another 25 bp cut in Jan to 4.33% or a price of 9567.0 (ignoring a potential Jan cut). SFRZ4 settled at 9563.0. The market appears comfortable projecting 25 bp cuts.
EFFR 4.58, and another cut into year-end puts us at 4.33. If inflation is around 2.25 and the neutral rate is 2% we’re there. (PCE yoy prices released Thursday were 2.1% with Core 2.7%). There are many who question how the Fed can cut into relatively loose financial conditions (tight corporate spreads, elevated stocks). Those conditions can change rather quickly as evidenced by October’s USD surge. On 9/30 DXY was 100.78. On Friday it was 104.28. This, as SFRZ5 rose 70 bps in yield from 9700 on 9/30 to 9630 on Friday. A rise in forward rates is what will tighten financial conditions. Note that a price of 9630 equals 3.70% for the end of next year which still reflects easing, just not as much. Long-end yields have responded to the idea of a less generous Fed and a government with voracious borrowing needs.
This week brings 3, 10 and 30 year auctions Monday, Tuesday, Wednesday. Sizes $58b, $42b and $25b. If the election is a mess, there’s a risk that the 30y could be sloppy. Note that the MOVE index closed at the high of this year, 132.58. The high in 2022 was 160.72 and the high in 2023 associated with the collapse of Silicon Valley Bank was 198.71.
| 10/25/2024 | 11/1/2024 | chg | ||
| UST 2Y | 408.4 | 419.7 | 11.3 | |
| UST 5Y | 405.3 | 420.6 | 15.3 | |
| UST 10Y | 423.0 | 435.5 | 12.5 | |
| UST 30Y | 449.9 | 455.5 | 5.6 | |
| GERM 2Y | 211.7 | 224.7 | 13.0 | |
| GERM 10Y | 229.1 | 240.5 | 11.4 | |
| JPN 20Y | 177.9 | 177.7 | -0.2 | |
| CHINA 10Y | 215.8 | 214.3 | -1.5 | |
| SOFR Z4/Z5 | -81.0 | -67.0 | 14.0 | |
| SOFR Z5/Z6 | -0.5 | 1.0 | 1.5 | |
| SOFR Z6/Z7 | 4.5 | 2.5 | -2.0 | |
| EUR | 107.99 | 108.35 | 0.36 | |
| CRUDE (CLZ4) | 71.78 | 69.49 | -2.29 | |
| SPX | 5808.12 | 5728.80 | -79.32 | -1.4% |
| VIX | 20.33 | 21.88 | 1.55 | |
The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that R.J. O’Brien believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. Copyright 2024. Alex Manzara.
Vol measures elevated pre-election
November 1, 2024
*******************
–Nonfarm Payrolls today expected 105k, though storms and strikes will make data less useful. In general, labor market indicators have been resilient. ISM Mfg expected 47.6 from 47.2.
–Yields little changed yesterday, with 10s 4.278% up about half a bp. However, red sofr contracts were -2 and greens -2.5. While the increase in implied vol has corresponded with the yield rise, the attached chart shows a new recent high for bond vol even as prices stagnated. Of course, the election bid could easily subside as November progresses. It appears as if positions have been pared going into next week, with open interest in TY down 71k (about 1.5%). FV -61k, UXY -18k, US +19k and WN -3k. End of October is also the fiscal year-end for many hedge funds.
–5/30 made a new recent low, marked at 32 bps as of futures settle. This spread was 51 bps a couple of weeks ago (10/21). An interesting CBOT block trade yesterday faded the spread weakness:
FVZ4 106.75p -15k 32.5 (-0.42d equiv -6.3k FV)
FVZ4 106.50p -7.5k 27 (-0.36d equiv -2.7k FV)
USZ4 116.0p +7.5k 1’30 (-0.39d equiv +2.9k US)
I see yield ratio as ~3.2 FV to 1 US, so bond side is a bit light. However, in my opinion FV vol slightly rich compared to US, so makes sense from that standpoint as well.
–Minor bounce in stocks this morning with little impact from AAPL and AMZN. Oil is up a couple of dollars from settlement as Iran warns of retaliatory attacks.
Down to the wire
October 31, 2024
******************
–New highs in near sofr calendar spreads as the 2y area bore the brunt of selling. 2y yield +3.9 bps to 4.156. 10’s were unch’d at 4.272 and 30s -3.5 at 4.482. 5/30 treasury spread new low at 35 bps. SOFR spreads: SFRZ4/Z5 new high -73.5, up 5.5 on the day (9562/9635.5) and H5/H6 -43.5 up 4.5 on the day (9595/9638.5). SFRH6 & M6 are peak contracts on the sofr strip at 9638.5. One month ago on 9/30 they were 9710 and 9708.5, a 70 bp sell-off. Yesterday, reds led, -5.875, greens -3.625, blues -1.25 and gold, the fifth year forward that trade more like the longer end of the treasury curve, up on the day +1.125.
–Stocks under a bit of pressure with MSFT down around 4% pre-mkt and META -3.7%. SMCI was down 33% yesterday as Ernst & Young resigned as the company’s accountant. Perhaps worth a mention, LLY down 6.3% yesterday on earnings; market cap around the same as TSLA.
–New Treasury Sec’y Paulson is vowing to work with Musk to slash gov’t spending. (If the garbage truck stunt doesn’t put Trump over the top I will be astonished). Huge gov’t deficits have been keeping the plates spinning. What worked for Argentina may take some time here in the US. On the other hand, the UK seems destined for new high yields. From Reuters: [UK Chancellor] Reeves’ plans will take the government’s tax take to a historic high of 38.2% of economic output by 2030.
–BOJ kept rates steady. Yen actually rebounding slightly from October’s long slump.
–Q3 advance GDP reported at 2.8% with strong Consumption. Today’s news includes ECI expected +0.9. PCE Prices m/m 0.2 with Core 0.3. YOY expected 2.1 from 2.1 and Core 2.6 from 2.7. Jobless Claims 230k. Chicago PMI expected 47.
