August 2. TTT trade fears spilling over
–Yields pushed higher and the curve steepened Wednesday; ADP was higher than expected at 219k, while Mfg ISM was a shade weaker at 58.1. Ten year poked just above 3% ending up 3.9 bps at 3.005. Although ranges have been rather tight in the curve, some new monthly highs seen. EDU8/EDU9, the peak one-yr spread closed at 60 and EDU8/EDZ8 at 25.0, indicating growing odds of a December hike (following September’s). Red/gold pack spread which hit a low of NEGATIVE 1.875 in July, posted a recent high of 5.125, up just over 3 bps yesterday (high last Feb was over 40 bps). EDU9/EDU0 also set a new high of 7 bps, worth a mention due to large buyer a couple of weeks ago at 2.5 and a reasonable amount of long call structures on the first red (EDU9). FOMC was non-event.
–This morning it’s all about trade fears again, with TTT (Trump tariff threats) coming fast and furious. China’s ccy continues to weaken, 6.8454 today, and Shanghai Comp was down 2%, with S Korea Kopsi down 1.6% and ready to test new lows. US stock futures also lower this morning, which is supporting FI.
–Factory Orders today with Payrolls tomorrow. Bank of England this morning, with GBP softer and near new lows in spite of expected hike.
