Banks down. Butter up.
October 25, 2023
*******************
–Curve flattened as 2’s were auctioned and PMI Composite was stronger than expected at 51.0. 5’s today, preceded by New Home Sales this morning. Weakest contract on the strip was red June, SFRM5, down 8.5 to 9571.0. Ten year yield unch’d at 4.84%.
SFRM4 -3.0 to 9484.5, SFRM5 -8.5 to 9571.0, SFRM6 -4.0 to 9578.0 and SFRM7 -1.0 to 9569.0. Every contract from June’25 back is around 4.3%.
–What is interesting is that the regional banking turmoil of March culminated at new lows in KRE (the regional banking ETF) in May. Not coincidentally, that’s when treasury yields were scraping new lows, with the 10y at 3.3% (vs yesterday at 4.90%). Currently KRE is not below May’s low of 34.52 (closed 38.71) but it is still down 40% from the February high. In an echo of regional banking issues, PacWest fell 5% yesterday. What is probably of more concern currently is the price action of several TBTF banks: BAC at a new low for the year, down 31% from the year’s high in Feb. Same with MS, new low, down 29% from Feb high. Same with Citi, down 27%. GS down 20% at a new low.
–We know there’s a Fed put with respect to TBTF banks. Just somewhat surprising that new lows in some of these names are met with a yawn.
Chart is KRE in black and BAC in gold. (bigcharts.com)
–My property tax jurisdiction is Cook County. The second installment of the year’s payment was moved to December a few years ago, so that sticker shock would come AFTER the election. So now the due date on the second installment is December 1. My bill is up 13.5% from last year. Not exactly disinflationary.
–On the old CME trading floor, I believe it was once a week around 10:30 that the loudspeakers would blare, “Is there any more trading in BUTTER?” It only traded for a few minutes. Well, I hope we all bought some as the attached chart shows a new high of 3.50/lb. Another product that isn’t responding to the Fed’s rate hikes. Of course, olive oil has more than doubled in the last year, from $4300/metric ton to $9400 now.
https://www.supplychaindive.com/news/butter-prices-record-high-ice-cream-milk-dairy/697359/
