Ten year auction today
November 9, 2022
–Ten year yield fell 8.6 bps in front of today’s auction and election results. In part, a bid for safety was supported by the crypto conflagration, with bitcoin below 18k, its lowest level since late 2020. “Sam Bankman-Fried’s $16 billion fortune is eviscerated” according to BBG. Negative covid news from China also a factor for treasury buyers. DXY eased to its lowest level since mid-September. Gold (GCZ2) gained $35 to 1716. Canada dollar breaking out to upside.
–Jan’23 FF contract settled +1.5 at 9559 or 441 bps, leaning closer to 433 or 9567 which should be the new EFFR on a 50 bp hike in December. In dollars, red/gold pack spread made a slight new low at -74.75, down a bit more than 2 bps. 2/10 holding at -55. SFRZ2 settled 9539.5, just about 20 bps lower than FFF3. Both contracts reflect the Dec FOMC, but the SOFR contract also prices the Feb 1 FOMC, which is only six and a half weeks into the contract period. The market currently is pricing the Feb meeting closer to 50 than 25. Jan/Feb FF spread settled 38 (9559/9521).
