The inflation problem is over… in China
August 9, 2023
–News that China has slipped into deflation (July CPI -0.3% yoy) has briefly overshadowed the US CPI report which will come out tomorrow. In the meantime, CLU3 trades 83.72, up 80 cents this morning, the highest level for the Sept contract in a year. US CPI is expected 3.2 to 3.3% yoy from 3.0 last, with Core 4.8% equaling the last reading. Ten year auction today.
–Philly Fed President Harker said he thinks the Fed might be at the point where it can hold rates steady. Curve bull flattened with the 2y note unch’d at 4.758, tens down 5 bps at 4.024% and the 30y down 5.4 bps to 4.202%. Near SOFR contracts slightly lower on the day while blues and golds were +5 to +6. Lowest one-yr calendar on the strip is Z3/Z4 at -142 (9465.0/9607.0), down 1.5 on the day.
–A couple of dates to be aware of: August 24-26 is Jackson Hole. Sept treasury opts expire 25-Aug. Sept FOMC is on the 20th. Oct treasury options expire 22-Sept.
–Equity prices are becoming a larger influence on rates. Sharp pullback yesterday morning in ES (low 4482 which was down 56) was substantially recovered by end of day. Not so fast WeWork; down 25% as the earnings call revealed substantial doubt about the company’s ability to remain viable. According to ZH, peak valuation $47b, went public at $8b now around $300m.
–US economy is a tale of two cities. Clip below doesn’t exactly square with the idea of plentiful high-paying jobs.
More Americans are tapping their 401(k) accounts because of financial distress, according to Bank of America data released Tuesday.
The number of people who made a hardship withdrawal during the second quarter surged from the first three months of the year to 15,950, an increase of 36% from the second quarter of 2022, according to Bank of America’s analysis of clients’ employee benefits programs, which are comprised of more than 4 million plan participants.
