Bonds. Monday’s weakness wasn’t an aberration
October 18, 2024
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–Housing Starts today. Waller speaks at 12:10 on Decentralized Finance. Kashkari at 10:00. Some have said that Kashkari’s recent remarks are concerned with excessive bond market (funding) volatility, so worth noting.
–Data stronger than expected yesterday with Retail Sales +0.4, Philly Fed 10.3 from 1.7 last and Jobless Claims 241k from 260. However, Ind Prod was -0.3. Yields rose 5-9 bps across the board, with pronounced weakness in the long end as 30s rose 9.4 bps to 4.393%. Again, this yield level is right around the midpoint of the year, but the return visit to the 119 handle (settlement was 120-00) in USZ4 was quite bearish. On Monday morning, USZ4 posted a new low of 119-14 on light volume as cash treasuries were closed. Prices rebounded into Tuesday and Wednesday (hi 121-23), but the long-end led yields higher yesterday with USZ4 low 119-30 (currently 119-29).
–ECB eased by 25 yesterday, and immediately there were projections of another 25 cut in Dec. ERZ4 settled 9707 Monday, 9715 yesterday and is printing 9719 this morning, in contrast to SFRZ4 which settled 9564 on Monday and slid to 9561.5 yesterday. EUR (ECZ4) has fallen from 1.1166 on Sept 30 to 1.0851 yesterday.
–Largest volume TY option yesterday was a buy of 30k TYZ4 106p for 3, bringing open interest in the strike to 68k. The only put with more OI is 109.5 with 106k open, settled 18 with -0.18d vs 112-015. Ignoring convexity there’s about 15.5 bps per TY point, so the 106 strike is around 94 bps otm and the 109.5 is about 39 bps out.
–GCZ4 settled at a new all-time-high 2702.50 yesterday and prints 2727 this morning.
