Worst is over?
March 28, 2023
–FFJ3 settled 9518 or 4.82%. On March 23 and 24 EFFR was 4.83 or 9517. May FF settled 9506.5 or 4.935, indicating decent odds of a hike at the May 3 FOMC. The August contract is right back at 9530. FFJ4, one year forward, fell 26.5 bps yesterday to 9616.0. Despite this quarter percent move, it is still almost exactly 100 bps higher in price/lower in yield than front April. Even as leaks in the banking system are addressed with duct tape (with requisite Fed guarantees), the market still believes eases are coming.
–Implied vol slid in conjunction with futures giving back some of the ftq bid. Tens rose 14.6 bps from Friday, to 3.526%. Two-year auction saw tepid demand, perhaps not surprising given that its yield is more than 100 bps lower than it was a couple of weeks ago. Five year auction today. TYM3 atm 116^ was 3’52 Friday, but 3’25 yesterday (atm 115 strike)
–Range this year on 30y bond yield has been around 3.53 to a bit over 4%. Ended yesterday in the middle at 3.757%, up 11.4 on the day. US and WN contracts appear to be under a cloud of consistent sellers going into the end of the quarter.
