Item: SOFR update - So the roll out of the new benchmark rate for money funding has arrived with little fanfare and even less understanding. I was chatting with a government bank examiner working at an extremely large bond house about the Secured Overnight Funding Rate and she mentioned something curious : "Neither she, nor the team at said extremely large bond house knew how the rate would be set." She asked my opinion. I said that trillions of contracts were still set to the tar pit animal previously known as LIBOR so I hoped the new rate sets worked out, oh and the 2015 vintage is spectacular but in tight supply.
Sidebar - secured vs unsecured is key difference.
Item: Rates have calmed and corrected in March as the Lion/lamb transition has played out. April - and Q2 - seem less clear to us than the preceding 6 months. Our base case remains unchanged, however. Equity markets chasing around a wide and volatile range that by Fall will appear sideways and rates clawing higher. The Employment Report looked to put the data together, so this month's could be less accurate. We think the data after will be a better guide.