Front contracts weak
May 24, 2023
–Short end rates continue to press higher; weakest SOFR contract was SFRZ3 at 9531.5 (-3.0) but Z4 closed UP 2 at 9677 and Z5 UP 2 at 9691.5. So, the curve flattened with 2/10 at a new recent low of -63.5. Regarding SFRZ3, on May 10 the settle was 9579.5, and since then it has closed lower for 9 sessions in a row, printing 9530 (4.70%) this morning. It’s worth noting that the last FOMC projections in March had the end-of-year 2023 FF target at 5.1%, exactly where the target is now (5.0 to 5.25%). Currently, the market appears to believe the Fed will be able to hold the line this year on the FF target, and might even raise at the June 14 meeting. Of course, some of the weakness may be related to the idea of a tsunami of bill issuance if the debt ceiling clown-show ends.
–From yesterday (MNI): Benchmark John Deere filed prospectus to issue $36b in medium term notes, details over timing and individual size TBA. If DE does issue $36b at one offering, it would be the fourth largest on record, $5b larger than last week’s 8-tranche jumbo issued by Pfizer. [Stock is down about 18% from the year’s high]
–Today includes the 5y auction (wi at futures settle was 3.715%), immediately followed by a speech by Waller and then the FOMC minutes. NVDA reports today.