March 27, 2024

–Yields down slightly in a quiet session.  Tens -1.7 bps to 4.234%.  Implied vol continues to compress in front of the long weekend. Good 5yr auction.  Capital Goods Orders non-defense solid at +0.7.  However, consumer confidence slipped to 104.7, lower than 107 expected (middle of the 2023 range, so no big deal).

–Buyer of 20k SFRQ4 9487.5/9475/9462.5p tree at 1.25 and slightly higher synthetic.  Settled 1.25 ref 9517.0 in SFRU4 (4.0/1.75/1.0).  The July version settled 1.0 (3.0/1.25/0.75).  The June version is 3.75 (6.5/2.25/0.50), and that’s with SFRM4 settling close to the upper strike at 9488.5.  Looking for a Fed on hold; see Waller below. 

–7 year auction today.

–Waller speaks at Econ Club of NY tonight at 6:00pm.  His speech on Feb 22 was titled “What’s the Rush?” [to ease].  One line: “I am going to need to see at least another couple more months of inflation data before I can judge whether January was a speed bump or pothole.”  In terms of El-Erian’s assessment that the Fed is shifting to a target range on inflation somewhat higher than 2%, we’ll see if Waller modifies his stance from the Feb 22 speech.  This doesn’t sound like a guy abandoning the 2% target:

…we could take our time and collect more data to ensure that inflation was on a sustainable 2 percent path

This means waiting longer before I have enough confidence that beginning to cut rates will keep us on a path to 2 percent inflation.

More data, and more time, will tell whether January’s CPI report was just a bump in the road to 2 percent inflation.

…continued progress toward the Federal Open Market Committee’s (FOMC) 2 percent inflation goal.

…I still consider them to be somewhat elevated to achieve our 2 percent goal.

–BOJ’s recent rate hike did little to stem the slide in the yen.  Today there are official warnings of intervention with $/yen above 151. A year ago gold priced in yen was 255961.  Now it’s 328823, up 28%. 

From ycharts.com

Posted on March 27, 2024 at 5:08 am by alexmanzara · Permalink
In: Eurodollar Options

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