Higher Rates
May 13, 2026
**************
–I am away from the desk the rest of the week.
–CPI for April was unsurprisingly higher than expected yoy 3.8 vs 3.7 exp and Core 2.8 vs 2.7. A year ago in April WTI crude was around $65. Now 102.
–In part due to data, and in part due to negative bond conditions globally, yields made new highs. As mentioned previously the pressure on red SOFR contracts has been relentless, and SFRM7 made a new low 9610.5 (9611.5). EFFR has been setting 3.63 last couple of days or 9637, so SFRM7 is more than one-quarter pct higher, i.e one hike as Warsh was confirmed to take Miran’s spot as Fed Governor. All SOFR packs out 4 years are clustered tightly at yields just above current EFFR. Whites 9624.5, Reds 9619.125, Greens 9625.125, Blues 9617.625. Ten year rose 5 to 4.462%, 30s +4 to 5.026 with an auction today. Slight new low in 5/30 at 90.4 bps.
–Interesting (as usual) note from BBG Cameron Crise about big tech’s flip-flop from free cash flow positive to borrowing:
- This is the AI trade’s thirst for capital; Meta has issued a load of dollar debt this month, Amazon has announced a big Swiss-franc offering, and Alphabet has sold bonds in Canadian dollars and euros, with a further slate of yen-denominated bonds to be sold later this month.
- They are hardly alone. Total dollar-denominated corporate bond issuance has crossed the $1 trillion barrier for 2026 already; this is the earliest that that threshold has ever been breached.BBGs Cameron Crise
–Also from BBG– New York City Mayor Zohran Mamdani has ditched his plan to raise New Yorkers’ property taxes — an unpopular measure he threatened to use to help close a two-year deficit. [Already running out of other people’s money to spend] I mention it because data centers are also ‘unpopular’ and also requiring capital.
