Oct 25. US long end trades soft
–Light volume Monday. Front end of the curve a bit weaker, with a buyer of 30k EDX 9900p for 0.75 to 1.0 ref 9904.5 in EDZ6 (open interest fell by 37k). The two year yield rose 1.5 bps in front of today’s auction. AAPL reports today as Nasdaq trades at the high, and Cubs/Indians start the World Series. 14 days until the US election, 40 days until Italian referendum.
–Nov/Jan FF spread posted a new high at 16.5. Chicago Fed’s Evans said he could see three hikes by the end of 2017, which would indicate 2 next year, yet the one-year euro$ calendar spreads aren’t moving and are pegged at 16 bps.
–Yuan made a new low and is slightly lower this morning. It’s likely no coincidence that some industrial commodities are pushing higher as a result, for example iron ore and zinc, and while copper has been quite weak, it is getting a jolt higher this morning.
–Both USZ and WNZ (ultra bond) had technically bearish days; new highs early in the session, negative reaction to higher than expected mfg PMI (53.2 vs exp 51.5), outside ranges with lower closes. Volume was light, but the long end continues to trade poorly.
–Bank of Canada’s Poloz suggested that fiscal stimulus may make further rate cuts unnecessary. Sort of an interesting contrast with Carney who immediately cut rates on Brexit.
–Amazon and Alphabet (google) report Thursday. While Nasdaq is at the high, the other averages, SPX, Russell, DJIA are not experiencing the same exuberance.
