June/Sept positive, or head of cabbage?
Dec 8, 2022
–Strong bid for treasuries and vol on Wednesday. Treasury yields across the curve were down by 10 or more with tens -10.7 to 3.404%. On Tuesday I noted the atm TYF 114.25 straddle settled 1’53; yesterday the atm TYF3 115.25 ^ settled 1’56. FOMC is next Wednesday, keeping relative pressure on the front end with an expected 50 bp hike, while the back end appears to be responding to the idea of lower inflation ahead (10y breakeven now 225 bps) and vulnerabilities in equities going into year-end.
–2/10 spread remains anchored sub-80 (-84.4 late). New low in Sept’23/Sept’24 1yr calendars at -155. March’23/June’23 calendar spreads: ED +1 (9489/9488) and SOFR -1 (9511.5/9512.5) but the next spreads, June’23/Sept’23 are -17.5 in ED and -19.0 in SOFR (9512.5/9531.5). The market is signaling a Fed ease by the middle of next year. Powell and other Fed officials have resolutely vowed to keep at it until the job is done. Earlier this year the bet was, ‘what would last longer, Liz Truss or a head of cabbage?’ Now: Head of cabbage, or June/Sept going positive?
on December 12, 2022 at 5:45 am
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It was a lettuce, not a cabbage.
If you google “MP heard shouting ‘bring the lettuce back’ during Prime Minister’s Questions” you can see the latest on this topic.
(I’d include a link, but that would trigger your spam blocker.)