Oct 11. Oil up >> Inflation expectations up. Thanks Vladimir
–Light volume yesterday in interest rate futures. Big mover on the day was crude oil, with the Dec contract settling +1.49 at 51.87, just a couple of dollars off the high of the year, as Putin suggested Russia may freeze or cut output. Red/gold euro$ pack spread gained 1.375 bps to close at 50 bps, just shy of the 100 day moving average, which it has been below since September of last year, and now comes in around 51. The dollar strengthened; currently the euro is testing the low from Friday, thus erasing the unemployment rally.
–Today the Labor Market Conditions index is released, which was -0.7 last and expected at +1.5, though this piece of data seems to have subdued relevance for the market. Wednesday brings auctions of 3’s and 10’s, followed by the 30-yr bond on Thursday. The money market reform deadline is on Friday. These factors are likely to weigh on fixed income prices. Another new high in Nov/Jan Fed Fund spread at 15.5, as expectations solidify for a hike in December. All near one-year eurodollar calendar spreads also notched new highs, with EDZ6/EDZ7 the peak at 21 bps. Imagine that….almost 1/4%.
