April 16. No escalation. For now.
–Markets are responding with relief that Friday’s strike on Syria seems to be contained. Oil has pulled back from new highs set Friday and stocks have bounced as bonds eased. Consequences aren’t always immediate.
–Friday featured new lows in the curve, with the red gold pack spread -3.75 to 10.875, a test of the low from 2006. The red to green pack spread (2nd to 3rd years) closed at 7.0 bps. The green to blue pack spread (3rd to 4th years) closed at just 1.625 bps. EDZ0/EDH1 remains inverted at -0.5. In treasuries, the 5/10 spread is 15.4 bps. EDZ8/FFF9 closed at 40.0, up 1 on the day, an indication that libor problems are not likely to recede.
–Today’s news includes Retail Sales, expected +0.4 after having hit a soft patch in the past few months. Bostic speaks at 1:15. TIC data at the end of the day may be important to gauge foreign demand for US bonds. May treasury options expire Friday.
