Making Sense

For India, WPI rose 0.27% mom with Food masking the otherwise deceleration in prices of non food article / Fuel and Power / Manufactured Products. System Liquidity Deficit stood at Inr 224K crore and WACR traded at 6.69%.  The Governor of the Reserve Bank of India met with senior management from Public and Private Sector Banks, emphasizing vigilance in areas such as risk management, customer protection, and financial stability. Yield on IN10s opened lower at 7.10% after the 7.14% peak seen yesterday.  US yields pulled back sharply which could be attributed to the Fed Speakers dovish tone / lower Dec PPI revision and expectations of a softer PCE reading. S&P lifted off lows to close 0.90% higher on the day. The market is currently pricing in 97 bps of rate cuts into 2024.  Yields High Low Close DoD ▲ US 2Y          4.67      ...

 UK inflation surprised on the downside with mom print at -0.20% (prior 0%) and yoy print at 3.90% (prior 4.40%).  PBoC Kept the LPR unchanged at 3.45% German PPI -7.9% yoy , prior -11.00% UK Retail Price Index 5.30% yoy , prior 6.10% US Existing Home Sales 3.82mn, Prior 3.79mn USTs rallied as the soft inflation print from the UK catalyzed a rally in bonds. UK Gilts closed sharply lower at 3.526% from prior day high of 3.698%. US 20Y bond auction was weak. High yield of 4.213% tailed the when-issued yield by 1.5 basis points. Dollar demand was soft, evidenced by a 2.55 bid-to-cover ratio that trailed the prior 12-auction average of 2.65.* Philadelphia Fed President Harker (2023 FOMC voter) stated rates should move lower, but not right away, according to Bloomberg. DXY consolidated recent gains with GBP leading losses on the inflation print. A quick look below on the current implied pricing for Central Bank Policy Rate For the day, you have the Initial Jobless Claims data, Fina...

US Yields moved higher overnight and equities plummeted over a full percentage point.  US2s high yield of 5.24% US10s high yield of 4.93% US2s10s bear steepened -30.5 bps Fed Fund Futures Jan 31, 2024 5.46% (peak terminal rates) Jun 12, 2024 5.25% (1 cut by mid next year) Dec 18, 2024 4.82% ( 64 bps of cut from peak terminal rates) Fed Fund Futures pricing implied a Fed Fund Rates as low as 3.97% on 08th August 2023 following the last hike of 25 bps on July 26 (Fed Fund rate 5.25% to 5.50%). News of downgrade of small and mid sized banks by Moody's and the Fed speak advocating patience saw significant cuts priced in 2024.  USD index moved higher yesterday after the small reversal seen the day before which was confusing. The Geo - political backdrop also continues to be fluid with the odds of escalation having risen. Fed's Waller said that he expects one more rate hike will be needed while New York Fed President Williams said that he is not yet ready to declare victory over inf...