June 7, 2021

–Front Soybean oil is at a new all-time high this morning at 72.77.  Stocks and bonds have given back some of Friday’s gains which saw tens end at 1.56%, down over 6 bps. as a solid payroll number at 559k was lower than expected and well under whisper numbers.  This week brings auctions of 3’s, 10’s and 30’s, which raise $99 billion of new cash.  On Thursday, CPI will be released, which is expected +4.7% yoy.  In my formative years, if you would have asked me for an over/under on the FF target with yoy CPI over 4% and NFP over 500k, I would have made you 5.5% (and been worried I set it too low).  Now, I hear that Janet Yellen said over the weekend that “…a slightly higher interest rate environment would actually be a plus for society’s point of view and the Fed’s point of view.”  OK.  Got it.  

–I was in a brief conversation Friday where I was told that inflation can’t be sustained because labor has no power.  This is one of the few times where everyone can see help-wanted signs.  Reports that businesses can’t find appropriate workers are widespread.  Cheap labor for China’s manufactured goods also seems to be in the rearview mirror, and strength in the yuan is inflationary at the margin for the US.  I saw a friend over the weekend who works for a construction firm that does a lot of business with Chicago Public Schools (CPS).  He said it’s a requirement that CPS gets three bids for every job, but now oftentimes his firm is the only one that provides a bid, and there is a special designation that now allows for fewer than three bids in order to get work done.  Cost management of subcontractors has become a challenge.  It’s a plus for society, I guess.     

Posted on June 7, 2021 at 5:17 am by alexmanzara · Permalink
In: Eurodollar Options

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