Slow trade
April 24, 2023
–On Thursday TYM settled 114-21, on Friday 114-15, with the ten-yr yield up 2.7 bps to 3.572, and this morning we’re right back to Thursday’s level at 114-225. Trade is lackluster. Chicago Fed’s National Activity last at -0.19, and Dallas Fed’s Mfg last at -15.7.
–On Friday, SFRH4 9600^ settled 126.25 ref 9594.5. The previous Friday 4/16, it settled 120.25 ref 9604.5. Short end vol firmed Friday, perhaps partially due to concern about the debt ceiling. Of course, current levels are much lower than the surge seen in mid-March related to banking failures. For example, on March 17, SFRH4 settled 9643 and the 9637.5^ settled 157.25.
–May FF settled 9496.5, indicating high probability of a 25 bp hike at the May 3 FOMC. However, FFK4 is 109 bps lower in yield at 9605.5. On the SOFR curve SFRU3/U4 is the most inverted at -154.5 (9512.0/9666.5), which is the low for any one-year calendar since the March banking turmoil. The low for the cycle of any one-year calendar has been -177 in January.
