Columbus Day, bank holiday
October 10, 2022
–El-Erian yesterday blamed the Fed for “slamming on the brakes this year” after frequently criticizing the Fed for being too soft. “So yes, I fear we risk a very high probability of a damaging recession that was totally avoidable.” Avoidable?
–Rate futures declined Friday, led by the short end. EDZ2 and SFRZ2 made new contract low settles, 9519 and 9554.5. EDH3 was the weakest contract and is lowest on the strip, settling at 9511.5, down 11 on the day. The lowest settle in EDH3 has been 9505 on Sept 23. The 2y note rose 6.1 bps to 4.304% while 5s rose 8.4 to 4.135% and 10s +6.3 to 3.883. Auctions this week of threes, tens and thirties starting tomorrow.
–FFF3/FFF4 calendar settled 4.5, now two days in a row above zero. SFRZ2/Z3 is still inverted at -7.5, but on Sept 26 closed +11. The one-year spreads are oscillating around zero for now, indicating that the terminal rate will be reached this year and iced for next year. Just two and a half weeks until the Nov 2 FOMC. At 9624, FFX2 projects about 70% odds of 75 bps.
–Used car prices seem to be getting some press in the past couple of days. Cox Automotive predicting a 14% decline in Q4 in used car prices.
