She Can’nae take any more Captain!
Stardate: 47634.44
–Plunge in GBP to 1.0349 overnight though current 1.07. Dollar/yen over 144. CNY weakened to new low 7.16 vs 6.75 in early August. Strength in DXY threatening to bring down the whole house of cards.
–US fixed income under pressure with JPY weak even after last week’s intervention; risk of US treasury sales to shore up the yen. According to BBG Japan holds $1.156T of long term UST. Low in 2018 was $960 billion
–This morning Jan’23 FF prints 9568.5 (-2.5) or 4.315%, 123.5 over the new EFFR of 3.08. FFX2 still indicates a 75 bp hike at the next FOMC. In spite of increasing global stress the market can’t buy into the thought of a u-turn by the Fed. Red SOFR contracts down 12.
–Liquidity likely to be quite poor in this environment. On Friday I marked TYX at-the-money 112.5^ 2’18 vs 112-20s. Earlier in the week it had been 2’06. This morning TYX 112^ 2’29/2’30 ref 111-31 or 10.5 vol. This is the highest level since the COVID panic.
