Ed Bradford
@fullcarry
US government bond trader since '93 with the usual stints along the way at primary dealers and HFs. Now on my own. Pseudonym
Given the post-COVID inflation experience, its strange how little inflation risk the markets are pricing. 30y inflation swap is literally pinned to the Fed's inflation target (adjusting for PCE-CPI wedge). Same is true of 30y breakevens
Obviously a new era Fed. Don't remember the last time the rate decision of an FOMC meeting was this uncertain. With odds closing in on tossup, if nothing else it will be fun and exciting. July hike odds:
Notable that the 1-year inflation swap remains subdued despite the resurge in crude prices. Last time oil price was at this level ($87), the swap was north of 2.80 vs 2.03 currently. This buys the Fed some time so no July hike IMO
Despite the recent resurge in crude prices, 1-year inflation swaps have dipped below 2%
Pre-CPI rate path update. 4.13 funds rate expected for hike cycle terminal rate next May so 2s with a 4.24 yield sporting nice carry profile
FOMC minutes: "The [SOMA] manager commented that ownership composition of USTs has shifted somewhat over the past several years from relatively price-insensitive official-sector holders to more price-sensitive private investors, which could have implications for the term premium component of ylds"
Whether the Fed hikes rates in July will resolve next week after June CPI prints. Hike odds pulled back after tepid job gains and inline FOMC minutes and are now hovering around 20%
Also, looks like nominal 30s are growing increasingly more comfortable with the 5 handle which is a good thing if you like a more normalized UST curve.
30y reals eyeballing 18 year highs at 2.87%. QE era negative real long-end rates now a slowly fading memory
Maybe labor market isn't as strong most think. CB's labor market gauge continues its downtrend and at a new cycle low
JGB 30s continues bear tightening vs UST 30s and the spread is now down to 94bps. Past few decades this spread would only narrow during Fed easing cycles with UST yields falling so a whole new normal here with JGB yields soaring
Quick turnaround from quarter-end today to a key NFP number on Thursday. With July hike odds still firm at 30%, a strong payroll print can go a long way of validating a near term hike.
Another casualty of the data center buildout: US trade deficit. Imports of capital goods up almost 42% YoY
The $60 (ish) level has been the key support this year but maybe too many visits?
Silver is now 11% below its 200 day moving average. The parabolic run-up high was 140% above earlier this year.