DJIA +0.5%, S&P +0.9% and CCMP +1.3% and VIX drops -4.5% $14.1. Nasdaq hits record high. Taiwan Semiconductor (TSM US) was up +9.8% post earnings, the outlook points to AI-fuelled growth spurring hopes for a global Tech rally. NVDA US +1.8% and Meta was highlighting appetite for their AI Chips throughout 2024.
Commodities were up +0.6%, led by agriculture which was up +0.8%, oil +2.0% at $74.05 and gold +0.9%, but US Treasuries refused to get excited, having been hit lower by initial jobless claims, which came at 187k, the lowest since Sept 2022. 2yrs were well anchored and 2s10s moved to -20bps following a block 2s10s flattener in the futures market, which equated to $960k per 1bp. 5s30s approached +34bps, retracing most of Wednesday’s aggressive flattening move.
The TIPS auction was well received, with non-dealers taking 96.8%. 10y breakevens widened to 2-month highs near 235bps. The breakeven rate is the difference in yield between inflation-protected and nominal debt of the same maturity.
What’s priced in? Expectations are now balanced at 50/50 for a 25bp cut in March, with 60bps of cuts priced by June, down from over 75bps before Waller’s comments on Tuesday. Dec 2024 rates are at 3.90%, down 25 bps, implying 140bps of cuts this year.
In Washington, the Senate passed a temporary spending bill to avoid a partial US government shutdown this weekend; the bill was sent to the House where it is expected to be passed later Thursday.
Asia new issues continued to perform. SK Battery pushed 8bps tighter as dealers added to inventory. SUMIFL 29 got to +112, 11 bps tighter than reoffer. The success of the issue has encouraged renewed interest in other Japanese insurance names such as Asahi Mutual Life (ASAMLI) and Nippon Life (NIPLIF). Woori Bank issued new 3y and 5y at CT2+53 (CT3+75) and CT5+85, both tightened around 5bps on active turnover.
Asia credit has opened with a positive tone across all sectors.
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