China is a wildcard
November 28, 2022
–Protests in China are a wildcard, with risks to both supply chains and global growth (the latter indicated by CLF3, below $74/bbl this morning, -2.32).
The NY Fed puts out a supply chain pressure index; pressures have been easing.
https://www.newyorkfed.org/research/policy/gscpi#/interactive
From the last report, “…pressures increased moderately in October after five consecutive months of easing. …The October increase was driven by upward pressures from Taiwan delivery times, Taiwan purchases, Asia outbound air freight, and UK backlogs.”
–Obviously the Fed doesn’t change policy based on China/Taiwan, but possible impact creates a new range of scenarios, and likely tilts trades toward safe havens, especially going into year-end.
–Friday featured new lows in 2/10 treasury spread at -77.5, the twelfth lower day in a row. Red/green euro$ pack spread new historic low at -80 bps. For a while, June’23/June’24 was the lowest 1-year calendar. It has moved forward now to Sept’23/Sept’24 at -136 (in both ED and SOFR) which reflects a ‘higher for longer’ view of the Fed.
–Williams speaks today. Powell on Wednesday.
