Dec 5, 2017. Fangs bite
-Big-cap tech was unimpressed by the Senate’s passage of the tax bill. As can be seen on the attached chart the NYFANG index closed below November’s range. MSFT -3.8%, AMZN -2.4%, FB -2.1%. However, interest rates still moved higher as the curve flattened to new lows. Two and five year notes both rose 3.2 bps to new highs at 180.6 and 214.8 respectively. Tens were up 1.7 bps; 2/10 fell 1.5 to a new low of 57.3. 5/30 new low of 62.4 and red/gold ED pack slipped 2 bps to a new low of just 31.125. Near eurodollar one-year calendar spreads made new highs, deferred spreads made new lows. EDZ7/EDZ8 closed 53 and FFF8/FFF9 at 46.5, both more or less priced for two hikes next year. The Fed’s dot plot projection is 2.1% for 2018, or three hikes, so perhaps -for the first time ever- the dots and actual outcome will sync up. New projections to be released at next week’s FOMC. Given steepness in front relative to back, the market is forecasting ‘front-loaded’ hikes that will slow future growth.
–A couple of interesting articles this morning. FT has an opinion piece ‘Stop worrying about China’s debt’ https://www.ft.com/content/0ca50290-d82c-11e7-9504-59efdb70e12f
