CPI, 30y, Minutes
October 13, 2021
–Today brings CPI, expected 5.3 yoy, with Core 4.0, both unchanged from last month. Thirty year bond auction. FOMC minutes after that. The IMF slightly downgraded global growth. “The outlook for the low-income developing country group has darkened considerably due to worsening pandemic dynamics. The downgrade also reflects more difficult near-term prospects for the advanced economy group, in part due to supply disruptions.”
–A few interesting notes from yesterday: EDU’22/EDU’23 which is the peak one-yr calendar spread on the curve, settled 77 yesterday. The highest that any one-yr has settled in 2021 has been 78 on April 5, the 9th to 13th quarterly, or first green to first blue. At the time it was EDM’23/EDM’24. That particular spread is now 60.5; the peak spread has now moved forward to the 4th/8th or last white to last red. Of course, this latter spread encompasses libor transition, but the steepness has moved closer in time as (global) tightening expectations are brought forward. The attached chart shows Dec’22 contracts in Short Sterling, Canada BAs, Euro$ and Euribor. Since the start of September, declines have been 56 bps, 39.5, 18 and 13. I suppose it makes sense that the US curve would flatten given weakness in reds and greens, but the rally in back contracts yesterday was aggressive given inflationary concerns. Reds -1.75, Greens -0.125, Blues +2.875 and golds +5.5.
–While EDZ2 closed -1.5 at 9940.5, there was large liquidation of options, starting with sales on 0EZ 9937.5 puts at 4 ref 9941.5/42. Settled 5.0. New recent high in EDZ1/EDZ2 at 42 (+1). In Fed Funds, Jan’22/Jan’23 settled 36, forecasting 1.5 rate hikes over next year.
–Recently there have been some large one-day sell-offs in gold. Every time it starts to rally with other commodities, it’s beaten back. This morning GCZ1 is again trying to rally, trading at 1770. There are several lows in October at 1750 or just below. I think sellers will be absent on the next upward surge, which appears imminent.
