Trades: Update

Alpha Report

Hey everyone,

This week has been playing out how I expected (see alpha report I published Sunday: Link) but there are several key things to note. First, Powell made it very clear that additional hikes are off the table.

The narrative of a “hawkish pivot” and pricing in the forward curve was shaken today:

If you are trying to track the forward curve in real-time to see how the market is pricing the Fed’s actions, use the CME Tool: https://www.cmegroup.com/tools-information/quikstrike/treasury-watch.html Before I had a Bloomberg, the CME tool and Tradingview were what I used all day long. These are still amazing tools!

The buying we saw today across the curve was an indication that traders were positioned to bearish bonds going into the meeting. We have likely made a bottom in the December 2025 SOFR contract.

Remember, the current state of markets sets the stage for the next move. We have just seen a rally in rates across the curve for the past 4 months. We are likely to see some softening in growth due to this but we are still in a period of time lags.

As I noted in the alpha report (link), traders already priced in what was seen and known.

This is why bonds rallied today. The QRA came out and was a complete letdown to bearish participants in the market. FOMC let down all the hawks and now we are back to dealing with the tensions of the SPEED at which inflation is decelerating and how aggressively the forward curve prices cuts.

Trades:

Let’s go through the specific trades I brought attention to in the alpha report and chat: