Vol smothered as rates rebound
February 6, 2020
–Once again yields moved higher as stocks continued their ascent. Tens added 4.4 bps to 1.647%. The curve steepened with twos up only 2.4 bps; 2/10 is back above 20 at 20.8 and 5/30 ended 67.7, also up 2 bps. China cut tariffs and Trump was acquitted on impeachment charges. It’s been a bad week for Nancy.
–ADP was significantly stronger than expected at 291k. Service ISM firm at 55.5. Today we receive productivity data with the Fed’s Quarles giving a speech on the economic outlook tonight. Payrolls tomorrow and the Fed releases semi-annual testimony. There is still nothing on the Fed’s calendar to indicate that Powell is speaking before Congress, however the House Financial Services Committee website says “the full committee will convene for a hearing on Monetary Policy and the State of the Economy.” on Tuesday, Feb 11. Sounds boring already but it would probably be a little less so if Powell were there.
https://financialservices.house.gov/news/documentsingle.aspx?DocumentID=406099
–Vol has been smothered as rates have retraced higher. EDU0 9850 straddle settled 26.5, having been 30 two days ago. On Tuesday’s open the TYJ atm straddle was 1’49 (131 strike) while yesterday the atm 130.5^ settled 1’39.
–The virus numbers seem to have faded in importance in the past few days, but it wouldn’t be surprising to see a significant global spread in the next few days which will re-focus the market. The dollar index is moving higher, and was at its best level since the end of November yesterday.
