Jitters
March 10, 2023
–Silicon Valley Bank? Really? Well, ok. As shown, KBWB (bank etf) was down 7.6% yesterday and there’s a whiff of panic in the air. Now I suppose we see whether a Fed put still exists.
–Yesterday there was a late buyer of 25k TYK3 114.5c for 17. Settled 17 ref 111-155, expires 4/21. This morning TYM traded to a high of 112-13 and is currently around 112.
–More dramatic that that….On Wednesday SFRH4 traded as low as 9477.5. Last night to 9526. Nearly 50 bp swing in two days as March midcurve options expire today; 0QH3 9500^ settled 17.5 yesterday vs 9501. Every so often (including in the recently released Fed’s semi-annual report) there’s a bit of hand-wringing about liquidity issues in the treasury market. This type of volatility doesn’t lend itself to smooth market function. And that’s my insightful contribution for today.
–Payrolls expected 225k. FFJ3 settled 9502.0, still leaning a bit closer to a 50 bp hike at the March 22 meeting than 25. Midpoint is 9504.5, and that’s where we are this morning.
–A couple of bullet points regarding the fiscal situation:
BIDEN BUDGET PROJECTS ANNUAL DEFICITS OVER $1 TRILLION EACH YEAR THROUGH 2033
BIDEN BUDGET PROJECTS ANNUAL DEFICITS BETWEEN 4.6% AND 6.8% OF GDP THROUGH 2033
BIDEN BUDGET PROJECTS U.S. DEBT RISING FROM 97% OF GDP IN 2022 TO 109.8% IN 2033
