August 3. Fear of downside (in bonds) is limited in front of payrolls
–Despite the stock rally, rates eased a couple of bps with tens down 1.7 bps to 2.984. You MAY have heard that AAPL hit market cap of $1 trillion, which dominated the news all day long. An article on BBG this morning notes that Japan’s market cap just edged out China’s, with both at about $6 trillion. The sum of AAPL, AMZN, GOOGL, FB and MSFT is a bit over $4T, so those 5 combined are about 2/3rds of either China or Japan. Make sense?
–And 1 trillion is, coincidentally about the size of the US budget deficit, as we go into supply of 3. 10 and 30-year auctions next week.
–The eurodollar curve from reds to golds eked out a new high just above 5.5 bps, having first gone negative around the 4th of July.
–Employment report today, with NFP expected 190k. Average Hourly Earnings expected +2.7 annual rate. Typically there’s some put buying of front midcurves in front of jobs data, but yesterday’s action leaned a bit more call buying (in both 0EU and 2EU 9712 strikes). New low this morning in China’s currency, with CNY 6.8727. In August of 2015, China’s devaluation caused waves of panic…barely a ripple now as the currency consistently slides. However, the copper market seems to indicate concern, testing new lows, off about 12% from levels in May.
