A quiet economic warning from copper

May 23, 2023

–ZH quotes Zoltan Poszar about banking issues:  “It’s basically lessons in not being able to run interest rate risk, not knowing how to make a loan that will be weathering a rising interest rate storm.”    Of course, deposit flight due to “bail-in” fears is a big part of the problem.  Jamie Dimon is also warning of more failures.  It’s not a surprise; costs of funds rapidly increasing while quality borrowers are sparse (except for the Federal Gov’t, and they’re doing their best to undermine THAT credit quality).

–Copper making new lows this morning for this calendar year at 3.63 (HGN3).  July WTI holding around $72/bbl as, according to BBG, “Saudi Energy Minister Tells Oil Specs to ‘Watch Out'”.

–No debt-ceiling deal yet.  

–Bullard yesterday said perhaps two more hikes would be in order, and says that “flush” households will keep the economy going.  Perhaps we’ll get a sense of consumer strength (or NOT) in some retailer reports today: Lowes, BJ’s warehouse, Dick’s Sporting Goods, Auto Zone, Urban Outfitters.  

–New high settled in SFRM3/SFRU3 at -18.25 (9480.25/9498.5) as Sept converges closer to the current EFFR of 5.08%.  Vol firmer across the board as debt negotiations drag.  Late new buyer of 10k SFRU4 9987.5/100.25 cs for 2.0.  Underlying SFRU4 settled 9654.5.  Revisiting the zero-bound next year?  New Home Sales today.

Posted on May 23, 2023 at 5:33 am by alexmanzara · Permalink
In: Eurodollar Options

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