PPI today
November 15, 2022
–A few interesting things on the day:
1) Ten yr breakeven 237.5…new recent low (since mid-Oct) although the low in late Sept was 216.
2) Vol quite a bit firmer in TY /treasuries. Not only was there no weekend decay, straddle levels nominally higher. Buying of TYF 112.5 and 113 calls covered resulting in open interest gains of 19k and 13.6k in those two strikes. TYF 112.5c settle 1’06 vs 112-13 in TYH (2’18 in straddle) and 113c 0’55s so 113^ settled 2’20.
3) the large seller of SFRU3 straddles post CPI endured bad marks…sold 9550 and 9537.5^ around 83 to 84. Monday SFRU3 settled 9530, down 7. 9537.5^ 86.25s and 9550^ 88.00s
Also, one-year calendars posted new lows. EDM3/EDM4 settled -115 (the lowest 1-yr spread). SFRM3/M4 settled -108.5 (9511/9619.5). Brainard said there was more to do, but also said appropriate to slow pace of hikes. Every indication of more hikes hits the fronts harder; spreads become more inverted.
USD continues to slip lower; DXY 106.07. China data softer than expected.
Today’s news includes PPI, expected yoy 8.3 vs 8.5 last. Core expected 5.6 vs 5.6.
