Long yields edge back up
July 21, 2021
–Early heavy selling in EDU1 (over 100k down to 9984.5; settled 85.5) helped front calendars settle at new recent lows. EDU21/EDU22 fell 2.5 to just 14.0, while EDZ21/EDZ22 dropped 3 to just 20.5. The reds were further supported by the exit of about 70k 0EU 9975/9962/9950 put flies sold at 2.5. However, longer end yields rose somewhat, rebounding from Monday’s plunge. Tens up 3.8 bps to 1.218% and bonds +6.3 to 1.878%. Today features a 20-yr bond auction by the treasury, which faces a hurdle given shrinking yields. The last 30-year auction went off at 2.00% and tailed about 2.3 bps which sparked a broader sell-off into the end of that day’s session. Bidding for 20’s might be a bit tentative today.
–On the dollar curve there was some notable midcurve put buying. 2EQ 9912.5p 5 paid for about 40k (settled 5 ref 9925 in EDU3). 2EU 9912.5/9900ps (3.25s) with 3EU 9875/9862ps (3.50s) 6.5 was paid in a roll-up of strikes about 40k. Later in the day, over 50k 3EZ 9837.5p bought for 9.5 (settled 9.0 vs 9881.5 in EDZ4). Net result was a bit of steepening from greens on back: greens (U3 to M4) +2.5, blues (U4 to M5) +0.75 and golds (U5 to M6) -1.75.
–I’ve attached a chart of Oats (thanks Pat Rooney for pointing out). While the July 4 BBQ might have been 16 cents cheaper on the year, breakfast seems to be a little more expensive. Coffee also surging. We lost the Mr Coffee brand but the Quaker Oats guy seems to be holding his own for now.
