Jan 12. The fading Trump effect
–Once again, little net change in interest rate futures on light volume. Solid ten year demand as w/i was 236 just prior to auction which came at 234.2. Treasuries are once again higher this morning as an underlying bid since the start of the year was only interrupted by the employment report which is now in the rearview mirror. TYH7 printed 125-105 today, same as the brief spike high after the NFP print. The 30 year bond contract at 153-16 this morning is the highest since mid-November (NFP high was 153-09). The press conference yesterday may have dulled the shine of Trump magic for the time being, as USD edged lower. Perhaps more important than Trump was Tillerson’s hearing. Trump has repeatedly bashed China on trade, but his rhetoric can perhaps be framed as a negotiating tactic. Tillerson appears serious and steadfast, and clearly opposes China’s man-made islands: “We’re going to have to send China a clear signal that first the island-building stops and second your access to those islands is also not going to be allowed.” The stage is being set for more than a simple trade skirmish, which could lead to de-risking.
–As a side note there is a program buyer of TYH 127c every morning, 8k at a clip. He has likely accumulated over 100k of the strike which settled 15 yesterday with 18 delta.
–News includes Import Price Index 0.7% and Job Claims 255k. 30 year auction. PPI and Retail Sales on Friday. PPI yoy expected +1.6 but risk is to the upside. Retail Sales for Dec expected +0.7. There are many Fed speakers today including Evans, Harker, Lockhart and Bullard. Yellen speaks about education this evening, not likely to be any policy pronouncements.
–In another sign that the Illinois/Chicago financial crisis is coming to a head, Mayor Rahm Emanuel is leaning on Moody’s to withdraw its junk rating because of the great strides Chicago has taken in raising taxes and fees. It’s not junk if you don’t call it junk?
