Wednesday 13, April 2022
Core print below expectations
A core group of Jeff Snider, Harley Bassman, Alex Gurevich, Lacey Hunt and Mike Green all believe that dollar yields are going lower. It’s a heterodox view, but the yield curve inversion, as well as declining productivity (which implies declining marginal returns to capital) points to lowering yields.
Alex Manzara is more of a practitioner than a theorist, but he is not ideological, as this quote shows:
Lower than expected core inflation of 6.5% sparked talk of ‘peak inflation’ which translated into a plunge of shorter maturity yields. The two year note fell nearly 12 bps to 2.385%, 5s down 11.2 to 2.671%, 10s down 5.5 to 2.721%. At the start of April, the 2/30 treasury spread went slightly inverted. Yesterday it hit a new recent high of 44.3 as the 30 bond yield actually rose 1 bp to 2.828%. On the euro$ strip the reds surged 19 bps while golds were only up 7. The red/gold pack spread bottomed April 1 below -87 bps and yesterday settled -28. January 2024 FF were up 19.5 bps to 9701.5, or just under a rate of 3%, essentially trimming one 25 bp hike. The thought is that if official inflation stats start to decline, then the Fed will not be forced into adopting the hawkish path outlined by Bullard et al.
Wide range of possibilities — Chartpoint
Someone on Quora asked “Why do some British people not like Donald Trump?” Nate White, an articulate and witty writer from England wrote the following response:
— James Tate (@JamesTate121) April 13, 2022
A few things spring to mind. 1/15
Wrap
PPI (Producer Price Inflation) in the USA was up 11.2%, YoY. By far the biggest component was energy, particularly diesel.
The oil futures forward curve is all over the place, but still dropping.
At some point, we will see a return to a normal contango situation. There has been a lot of noise recently. It will be interesting to see how this develops.
The oil price hikes are still seen as tightening, and have caused bonds to rally. The reduction in discount rates has resulted in a rebound in NDX: it was up 2%.
The oil price hike dragged up a lot of other commodity prices, especially gasoil, up 7.5% (near month) ($GOIL).
Image of the day
Shirley Baker, England, 1960s pic.twitter.com/UUEOQ2In4b
— Daniel Brami (@Daniel_Red_Eire) April 13, 2022
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