Breakevens at lower end of recent range
September 30, 2022
There’s something happening here
What it is ain’t exactly clear.
Buffalo Springfield-For What It’s Worth
–Those lines capture my sentiments about the market. Probably a good time to keep risk close to the vest as we enter Q4.
–Ten year and five year inflation breakevens at new lows right around 218 to 219, the high in 2018. That’s when the FF target had peaked out at 2.25 to 2.5%.
–Bullard, Mester talking tough on the need to tighten further as Yellen prepares to make a graceful exit…or is shoved out. It doesn’t really matter how she leaves, though perhaps it’s a signal of the last tie to economic knowledge slipping out the administration’s back door.
–Today’s news includes the Fed’s preferred measure of inflation, PCE deflator expected 6.0% from 6.3 last, with Core expected 4.7 from 4.6 last. German CPI yesterday was 10%.
–EDZ2/EDZ3 spread settled -23, but SFRZ2/SFRZ3 at -7. Front Dec euro$ contract reflecting year-end funding stress. FFF3/FFF4 still above water at +2 (9580.5/9578,5). Can the Fed hold rates around what is now considered to be the terminal rate of around 4.0-4.25% for an entire year?
