Powell today. Stronger data causes rethink on easing
August 22, 2025
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–Data Thursday stronger than expected with S&P Composite PMI 55.4 vs expected 53.5. However, Philly Fed was -0.3 vs 6.5 expected and 15.9 last. Continuing Jobless Claims at 1972k is at a NEW HIGH for the cycle. Hammack said that given the data, she wouldn’t see a case for a September ease, which helped shift the front end lower. Weakest SOFR contracts was Z5 which settled -7 at 9614.0 SFRU5 ended -3.5 at 9586.0. The market is cutting odds of a Sept cut in front of Powell’s Jackson Hole speech today. High in SFRZ5 post-NFP was 9632.5. Yesterday’s close was the lowest since that data.
–Bitcoin late yesterday at 112k…close to making a new low for August.
–September option expiration in treasuries. TYU5 111.5^ settled 19 vs 111-175. Seems low.
From BBG article on private credit:
“A major selling point of private credit is the low default
rates,” Bukhari wrote in a report this month. “This reputation
hinges on a narrow definition of default.”
If actions such as maturity extensions and conversions of
interest payments from cash to PIK — so-called selective
defaults — are added to the calculation, the rate at which
borrowers are failing to meet debt obligations is much higher,
according to S&P.
Defaults may have been “disguised by significant amendment
activity,” as lenders can tweak credit agreements to forestall
defaults, according to a report this month by valuation firm
Lincoln International.
Lincoln’s “shadow default rate” for the market, which is
calculated by looking at “bad” PIK investments as a proportion
of total investments, stood at 6% in the second quarter,
compared to 2% back in 2021.
