1/5
🧵on changes in thinking in just 2 weeks
Today's forward curve (cyan) is now equal to the year-end Fed's (blue), This is a HUGE move from Feb 2 (green).
A pivot is no longer priced in.
Also, for the first time this cycle, the market is pricing MORE hikes than the Fed.
🧵on changes in thinking in just 2 weeks
Today's forward curve (cyan) is now equal to the year-end Fed's (blue), This is a HUGE move from Feb 2 (green).
A pivot is no longer priced in.
Also, for the first time this cycle, the market is pricing MORE hikes than the Fed.
2/5
The focal point is the June 14 FOMC mtg. Will the Fed hike to 5.50%, above the Fed's 5.25% terminal target?
Feb 2, the day before the 517k payroll report, a June 5.50% funds rate was just a 2% probability. Yesterday it surged again to 63%.
A big change in thinking!
The focal point is the June 14 FOMC mtg. Will the Fed hike to 5.50%, above the Fed's 5.25% terminal target?
Feb 2, the day before the 517k payroll report, a June 5.50% funds rate was just a 2% probability. Yesterday it surged again to 63%.
A big change in thinking!
3/5
Where does the Fed go if the 5.25% "ceiling" is broken?
Since Feb 2, options betting that the Fed goes to a target of 5.75% - 6.00% by SEPTEMBER is exploding higher.
Again, all of this has been new in the last two weeks.
Where does the Fed go if the 5.25% "ceiling" is broken?
Since Feb 2, options betting that the Fed goes to a target of 5.75% - 6.00% by SEPTEMBER is exploding higher.
Again, all of this has been new in the last two weeks.
4/5
And why does the market think the Fed can hike well above 5.25%?
Since Feb 2, 1-year Inflation breakevens (blue) are surging, diverging with crude, so it is more than just higher gas prices.
"Persistent" inflation means the Fed is not "sufficiently restrictive" at 5.25%.
And why does the market think the Fed can hike well above 5.25%?
Since Feb 2, 1-year Inflation breakevens (blue) are surging, diverging with crude, so it is more than just higher gas prices.
"Persistent" inflation means the Fed is not "sufficiently restrictive" at 5.25%.
5/5
Will the stock market notice?
BofA's Michael Hartnett is trying to tell it. Will it listen?
Or are we too busy with 0DTE options and $BTC/ $TSLA big YTD gains to look more than a week into the future?
zerohedge.com
Will the stock market notice?
BofA's Michael Hartnett is trying to tell it. Will it listen?
Or are we too busy with 0DTE options and $BTC/ $TSLA big YTD gains to look more than a week into the future?
zerohedge.com
Recap
Since Feb 2, the day b4 payrolls:
Forward curves, massively changed
June probability of 5.50%, 2% to 63%
Options betting 6% by fall, exploded
1-year inflation breakevens, surged.
Not everyone has caught up.
I detailed this in my last podcast.
youtube.com
Since Feb 2, the day b4 payrolls:
Forward curves, massively changed
June probability of 5.50%, 2% to 63%
Options betting 6% by fall, exploded
1-year inflation breakevens, surged.
Not everyone has caught up.
I detailed this in my last podcast.
youtube.com
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