Eat A (im)Peach
Sept 25, 2019
–Stocks and yields fell yesterday as Speaker Pelosi opened formal impeachment proceedings. Tens fell 7.6 bps to 1.64% in front of today’s five year auction and tomorrow’s 7-year. On the euro$ curve, reds led the way, closing +9.375 bps. Greens through golds were up 8 to 9. Volume relatively light but there was some noticeable call buying in the front end. EDF0 9900c 2.5 paid for around 60k v 9836.0 in EDH0 (appears exit as OI fell 27k). Other new buying included EDZ9 9812/9837cs which settled 5.25 vs 9804.5, OI +21 and +24k. The peak contract is still the 8th quarterly, EDU21 which settled 9871.5, a bit more than halfway back from the 9/4 high 9895.5 to 9/13 low 9843.5. This 52bp move took just 7 sessions. TYZ also just above the halfway back level at yesterday’s settle of 130-23. Implied vol firmed with prices.
–FFV9 settled 9812.0 with concerns about funding pressure continuing. April 2020 FF settled exactly 50 bps higher at 9852.0 with four FOMC meetings in that time frame. FFJ0 was up 8 bps on the day!
–The question going forward is whether the impeachment hearings will sap market confidence. Yesterday’s Consumer Confidence already showed a crack, at 125.1 vs 135.1 last. If a fall in equities spills over into a weakened economy, I can’t imagine that it works to the Dems favor come election time. Bitcoin was down 17% yesterday and is stable this morning with the Sept contract 8350. That leaves gold as the safe haven winner yesterday, closing at the 61.8% retrace from early Sept high to mid-Sept low. GCZ9 settle yesterday 1540.20.
