PCE Prices today
October 27, 2023
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–Real Q3 GDP was reported at 4.9% yesterday. Nominal 8.5%. Seems high, but with the gov’t churning out spending, perhaps it makes sense. Rate futures rallied. On Wednesday the ten year note rose 11.1 bps to 4.951% and yesterday that move was erased as the yield fell 10.9 to 4.842%. After a poor 5y auction Wednesday, yesterday’s 7yr was on the screws at 4.908 with solid bid/cover.
–Today PCE spending and income. PCE prices expected +0.3 on the month, with yoy PCE price expected 3.4 from 3.5, Core 3.7 from 3.9.
–Sofr calendar spreads declined. For example, the most inverted one-year spread is SFRH4/H5 at -95.5 (9466.5/9562.0). H4 was up 4.5 bps in price while H5 jumped 11.5. There are now only two 3-month calendars that indicate at least one quarter pct ease. SFRM4/U4 settled -26.5 (9488.0/9614.5) and SFRU4/Z4 -26.0 (9514.5/9540.5). So the market is targeting the middle of next year for the most aggressive easing, which is no longer very aggressive at all.
–Dollar/yen is holding above 150, was 150.39 late. Last October high was 151.95. BoJ meeting next week, where some expect an increase in the rate cap to 1.5%.
–November treasury options expire today. TYZ3 settled 106-11. On Wednesday there was a buyer of 40k TYX3 107.5 puts, which yesterday settled 1’10, intrinsic. That put has the most open interest in Nov, at 92.6k.
–Reports of US bombing raids on Syrian (Iran proxy) targets has oil up close to $2, CLZ3 85.09 last.
