Producer Prices Jumped 1.3% and the Bond Market Marked 5 Tenors Down 9bp Each

Producer Prices Jumped 1.3% and the Bond Market Marked 5 Tenors Down 9bp Each The same 9 basis points, 5 times over, as though somebody had a stamp

The loudest inflation print of the run landed at 08:30 ET. Producer prices up 1.3% on the month against 0.6% expected. On the year, 6.3%.

The bond market read it and bought bonds.

Not a bit of the curve. Everything from the 5-year out, by precisely the same amount: 9 basis points at the 5-year, 9 at the 7-year, 9 at the 10, 9 at the 20, 9 at the 30. We recomputed it across all 14 published tenors, because a claim of that shape has caught this book out before. Exactly 5 carried it and they are the 5 longest. The 1-month bill went the other way by 6, the 2-month by 4, and two tenors could not be bothered at all.

Receipts, since they are owed. On 5 October this book filed a shot: the front end is pricing a path labour data no longer moves, falsified if the 2-year closed at or below 4.78% on 3 of 10 named sessions. We named the killer at filing, in writing, and it was September producer prices. It printed yesterday. The 2-year closed 4.77%. That is the third. The shot is dead, on a session inside the window we named, at the level we named. The print landed the same morning and the 2-year fell, and this book cannot tell you that the second followed from the first.

Pleasant feeling, being right about being wrong. Less pleasant: not knowing why.

The One That Mattered

The print is timestamped 12:30 UTC, an hour before the cash open, and no part of this move has a named cause in this book. What we can describe is the shape. Nine basis points, five times, looks less like a market forming a view than a market reaching for the nearest round instrument. The front end is where an inflation print is supposed to land, and the two shortest bills went the way the textbook says whilst everything with a decade in it rallied. On a tier-3 relay, October’s tightening odds went from 29.9% to 13.8% and December’s single-hike mode from 62.0% to 75.7%. Tightening was not cancelled. It was rescheduled.

Why did the long end rally 9 basis points at 5 tenors on a 0.7 point producer-price surprise? We went down the rabbit hole in today’s Macro Edge. https://antivestor.com/macro-edge

Stock Market Edge

The Dow Found 556.21 Points and the Nasdaq-100 Found 15 A 424.11-point gap down, a 1.963% range, and five-hundredths of 1% to show for it

Premarket snapshot:

At the 07:30 UK capture, 02:30 ET, December S&P futures sat 7,797.50, up 0.08343% on their 7,791.00 settlement. December Nasdaq futures up 0.008294%, December Dow 0.150677%, December Russell 0.183335%. Read twice, 85 seconds apart, identical on all four, which is a protocol confirmation rather than a measure of activity.

Sector rotation:

Eight sector proxies up, 3 down, the previous session stood on its head. Health care led at 1.856749%, having also risen 2.534481% the session before, and not a catalyst in sight for either. Energy was last, 1.582138% lower. Utilities fell 7 cents, so the count rests on 0.07 of a dollar.

Earnings or guidance:

Sixty-two companies filed an earnings 8-K, mostly large banks, and financials added 1.375642%. The interesting one went the other way: Dell, down 6.80% on 2.346 times its usual volume, two sessions to 17.30%. CoreWeave, Wednesday’s corpse at 15.460738% lower, rose 5.944056%.

Cross-asset nuance:

The dollar fell 0.51108%. Bond volatility rose 3.454781% whilst equity volatility fell 2.43035% to 16.46, the volatility curve holding contango at 0.890211, which is not what fear looks like. The expiring November crude contract settled 97.97, up 3.02871%, and December crude 96.50, whilst December Brent fell 0.132001%. One of those is a global benchmark.

Crypto Market Edge

The Funds Sold 261.4 Million, Then Bought 5.1 Million, and the Price Rose Through Both Nine of 12 issuer columns printed zero net, which is its own kind of opinion

Price snapshot:

Bitcoin closed 82,132.38 on the 00:00 UTC mark, up 0.644224%. Ether closed 2,439.20, up 0.817551%. Both undid the previous session, when bitcoin fell 1.758% and ether 3.024%. Ether’s move was 1.269 times bitcoin’s, and it was the larger mover on the way down too, at a different multiple.

Flows and positioning:

A net 5.1 million dollars into US spot bitcoin funds, one session after 261.4 million left. All 12 issuer columns reconciled to the row’s stated total: BlackRock in 16.8 million, Invesco out 4.1 million, the Grayscale trust out 7.6 million, nine issuer columns at zero net. Ether funds shed 60.3 million, 73.631841% from one fund.

Leadership and rotation:

The ether outflow run is two sessions, after a single-session break. Nobody may call it eleven. Bitcoin has no run at all. Cumulatives display at 57,032 million and 13,038 million, to whole millions, which is the provider’s convention and not ours.

Catalysts and roadmap:

Nothing scheduled either side. Import and export prices at 08:30 ET, industrial production at 09:15 ET, and a 20-year reopening on 21 October landing on the tenor this book watches.

TL;DR

• Producer prices beat by 0.7 points and the bond market marked 5 tenors down by the identical 9 basis points, which is a reflex rather than a view.
• The Dow added 556.21 points and the Nasdaq-100 subtracted 15, having gapped 424.11 lower first, so everything and nothing happened at once.
• NYSE advancers beat decliners 3.031019 to one after 0.325389 the day before, one session above the book’s own logged base-rate maximum and the other near but inside its low end.
• Bitcoin took in 5.1 million dollars after losing 261.4 million, and rose on both, with nine of 12 issuer columns at zero net.
• Import and export prices print at 08:30 ET, and a 20-year reopening on 21 October lands on the only tenor still above the 30-year.

Fun Fact

The 7-Year Inherited A Round Number 5.00% did not leave the curve, it moved 2 years further out

On Wednesday the 5-year constant maturity yield closed at exactly 5.00%. On Thursday the 5-year closed 4.91% and the 7-year closed at exactly 5.00%. The round number did not vanish. It simply changed tenor and carried on.