We Won. (Just keep saying that to yourself)
October 13, 2023
–CPI a bit stronger than expected with headline m/m 0.4 vs expected 0.3 and y/y 3.7% vs expected 3.6%. The NY Fed is discontinuing its UIG (Underlying Inflation Gauge) perhaps after Nobel laureate was deservedly heckled for this ridiculous post:
–“Very little cost”… if you take out the price of necessities and ignore the gargantuan budget deficit. As Curly would say, “Is everybody dumb?!”
–Oh, also included in the “very little cost” is soaring long end yields, exemplified by a poorly received 30 yr auction. W/I was 4.802 and actual result was 4.837, a significant tail. USZ3 contract sold off aggressively and settled 111-15, down 1-29. It was an outside day with a lower close. At futures settle the 30y yield was 4.87%. I guess the mortgage market didn’t get Krugman’s memo as the 30-year fixed is still 7 7/8-8%. Red, green and blue SOFR contracts settled -9 to -10.5.
–Russell 2k futures also having a hard time digesting the “We won” scenario, dropping 39 points or 2.2% yesterday. It’s not quite at the year’s low, but the cash index was over 2000 in mid-summer and is now 1734. The small cap guys are wondering how to roll debt, or if they’re completely shut out of the market. Bank results this afternoon include JPM, C, WFC. I’m no bank analyst, but would suspect there will be some discussion of deteriorating credit quality and more stringent lending standards.
