The Weekly Report

  • ​Light Treasury selling to end the week allowed rates to tick 5bp higher from the morning’s most active flows. This afternoon could be a preview of muted activity Tuesday and Wednesday despite the crush of data on Wednesday morning. If the FOMC minutes fall in an empty forest Wednesday afternoon, do they make any noise? If so, expect the clatter on Monday. Last year, Thanksgiving week’s biggest news was the isolation of the new omicron strain in South Africa.
  • The rate increases today ignore the plunge in inflation expectations that accompany a mini-rout in the oil market. The 8-15bp decline in expectations for the next three years has scrambled the forward inflation curve, further obscuring relative value on the intermediate curve. The first article considers three developments this month that prevent price discovery and distort relative values. Fed talk has further inverted the nominal curve as WTI remains $80/barrel for December’s settlement next Monday and then well into 2023 too. Even though the physical glut of oil is in Texas, Brent crude is well under its previous floor of $90.
  • A thorough review of the first numbers for household debt in the third quarter shows consumers have ample credit at their disposal and a ready appetite to spend more. That was the message from October retail sales, seen on the cover.
  • Current bids: 10s at 3.816%; 5s at 3.996%; and 30s at 3.927%.

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