Confidence Game
May 3, 2023
–FOMC today. High odds of a 25 bp hike to 5.0-5.25%, but what seemed certain yesterday morning was less so as the day progressed and regional banks were trashed. KRE (regional bank etf)-6.3%. USB -7.0%, KEY -9.4%. All new lows. This stuff’s going down faster than Bud Light sales. New Fed Effective (EFFR) should be 5.08. FFM3 traded as low as 9488 in the morning, or 5.12 but settled 9496.0. There is an FOMC June 14, so at yesterday’s low there were small odds of another hike at that meeting. However, almost all news articles I saw proclaimed that this would be the last hike. Red SOFR pack +19.375 with June’24 the star performer, up 20 bps to 9660 or 3.4%.
–If a bank can’t be certain of its own funding then certainly the loan book needs to be trimmed. It’s boiling down to confidence in the system. Remember when they made all the money market funds based on treasuries, so that they wouldn’t break the buck? Well now the gov’t can’t agree on raising the debt ceiling. Confidence is eroding on many levels. How to restore it? Can’t slash rates in an environment where inflation is still a threat. Guarantee ALL deposits? Might be too late now, because the COST of deposits are now higher; almost everyone knows that AAPL is paying 4.15% with no minimum.
–Fed funds greater than 5%… but yesterday 5’s fell 17.7 bps to 3.454% and 10’s down 14.2 bps to 3.43%. New recent high in 5/30 to 27 bps (3.454/3.724). New recent low in ten year breakeven to 220.7 bps.
–Ironically, Confidence Game is a horse running in the Kentucky Derby. 80 to 1 shot. I’m putting down $100 to win.
https://www.wagertalk.com/news/horse-racing/confidence-game-odds-prediction-derby/#:~:text=Confidence%20Game%20is%20currently%20a,odds%20to%20win%20the%20race1.
What is the origin of Confidence Game’s name?
Confidence Game’s name is a phrase that means a trick or scheme that relies on deceiving someone. The origin of the phrase is uncertain, but it may be related to the word “confidence”, which is a feeling of trust or belief in someone or something.
The phrase may also be a pun on the word “game”, which is a term used in horse racing to describe a horse’s willingness or ability to compete. Confidence Game’s name is fitting for a horse who likes to deceive his rivals and compete with them.
