Spring, or a global replay of Arab Spring
March 21, 2022
–Friday featured a continued rip in stocks on the quarterly option expiration, with SPX gaining over 7% from Monday’s low to Friday’s close. In rates the curve flattened further, with 2/10 at a new low of 19 bps, down 6 on the day. In euro$’s reds (2nd year) to all deferred contracts made new lows on spreads. Red/green settled negative 30.125 and red/gold negative 47.375. The difference between the two-yr note yield (1.953%) and thirties (2.415%) is just (positive) 46.2. The high yielding contract on the SOFR curve is EDU’23 at 9749, which is nearly 10 bps higher than the yield on the thirty year bond.
–Fed effective set at 33 on Thursday after the hike and April FF settled Friday at 9966.0 or 34 bps. The next two FOMC meetings are May 4 and June 15, so the next clean FF contract is July, which settled 9798.5, a spread of 67.5 to April. In other words, odds of hikes of 50 bps at a given meeting are being priced. Of course, last week Bullard said he would like to see 3% by year-end, with additional hawkish comments by Barkin, Waller and even Kashkari. Nothing in the market comes close to pricing Bullard’s blather.
–Meanwhile in Egypt, bread price controls: “It is worth noting that President Abdel Fattah El-Sisi directed the government to control prices in the markets and set specific prices for bread to prevent monopolistic practices and exaggerated increases in the prices of bread not subsidized by the state.” More and more articles are forecasting food shortages and famine.
