Bond supply…then payrolls
January 3, 2025
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–Treasury auctions of 3, 10, 30y moved to Monday, Tuesday, Wednesday due to memorial day for President Carter on Thursday. Payrolls on Friday.
–Yields were lower yesterday morning to start the year but ended around unch’d with tens 4.573%. SOFR contracts -1 to +1.5 out to golds (5th yr). There was fairly heavy block activity in TY puts, looked to be rolls from Feb puts into long TYH 106p from TYG 108.5 and 107.5p. In any case, DV01 currently on TYH is $64.70 so against a settle of 108-26 vs 10y cash yield of 4.573, let’s call the 106 strike something like 44 bps away ~5%.
–Feb options peak open interest is 108.5p (33s) and 108p (21s) at 95k and 98k, with former down 9k and latter +21k. TYH5 106p settled 14 and open interest rose 44k to 60k (now the put strike with peak OI). Also a new buyer of 10k TY wk2 108p which settled 9.
–BBG reports after having defended 7.30 in CNY for a couple of weeks, China let it go, trading last at 7.3187. There’s also this snippet from Reuters:
RTRS BEIJING, Jan 3 (Reuters) – China will sharply increase funding from ultra-long treasury bonds in 2025 to spur business investment and consumer-boosting initiatives, a state planner official said on Friday, as Beijing cranks up fiscal stimulus to revitalise the faltering economy.
–SHCOMP lower again this morning as the year begins with a further unwind of the late Sept China stimulus package. I don’t know that Trump’s tariff plans are likely to be inflationary given stagnation and a weaker currency in China.
