Dec 13. Roll Tide
–Apparently there ARE limits to what the US public will vote for as Roy Moore snatched defeat from the jaws of victory in the Alabama Senate race. They got a name for the winners in the world / I want a name when I lose / They call Alabama the Crimson Tide / Call me Deacon Blues.
–No reaction in stocks which seem intent in closing out the year on new highs.
–Another Fed day as Janet Yellen coasts to the finish line. Again, I would suspect that the change in projections will be a bump up in 2018 GDP to something like 2.3 from 2.1. The 2017 projection for GDP was notched up in September from 2.1 to 2.4 while the 2018 projection remained locked at 2.1. Yellen can either take a victory lap or warn about possible imbalances…maybe a bit of both.
–Both the 2yr and 5yr posted new high yields at 182.7 and 217.0, but there is absolutely no reach for puts. In fact, the opposite occurred: There was a seller of 50k FVG8 115p to buy 117.25c, taking in 1 to 0.5 64’s. Settles FVG 115p 5.5, 18d and 117.25c 4.5 with 14d. Another large trade was a buyer of EDH8 9837/9850 c 1×2 for 0.5 (settle 1.0 and 0.25); appears to be rolling down from longs in 9850c, traded at least 60k.
–CPI today expected +0.4 with Core +0.2 and YOY Core 1.8. By now everyone knows that Central Banks have a 2% currency depreciation target, I mean, inflation target. And CB’s are typically quite confident that when inflation hits that magical target, that they can anchor it there. However, Carney has some explaining to do as UK CPI came in over 3%. Can we be sure it doesn’t happen here? Does the thirty year bond at 2 3/4% compensate for even the small chance?
