March 8. Moving toward trade wars
–In spite of Cohn’s resignation late Tuesday, markets calmed by Wednesday morning and net changes were small. Rates edged marginally higher. Big trade of the day was a new buyer of 50k EDM9 9712.5p for 14.5 vs 9729.5 with 38d. Straddles from EDM9 back settled up 0.5 to 1.5 higher. EDM9 9725 straddle closed +0.5 at 44.5. The green pack 9712 straddle strip had been sold at 306 a couple of days ago but settled 312.25 yesterday. Third day in row TYM settled 120-01 and that straddle closed at 2’00 (4.5 vol).
–ADP was better than expected 235k. Nothing unexpected out of Beige Book…’prices increased in all districts’.
–EDZ8/Z9 settled 34.5 +0.5 on the day, but EDZ9/EDZ0 flattened by 1 bp, closing at 8.5.
–Bloomberg reports that the US is considering broad curbs on Chinese imports. China’s response may or may not be to sell treasuries, but we’ll be able to gauge the appetite at auctions Monday and Tuesday of 3’s, 10’s and 30’s. Bond contract appears vulnerable to further downside, and with 5/30 mired around 50 bps which is a support area, risk to the bond yield appears skewed higher. Employment report tomorrow. ECB today with Draghi expected to remain cautious on forward guidance.
