July 31. BoJ fears fizzle
–Yields in the US edged higher yesterday (led by weakness in European Govt bonds) and the curve steepened in front of the BOJ meeting. That move has reversed as the BOJ kept ultra-easy policy, vowing to keep rates low for an extended period and hold the ten year around 0. Ten year JGB fell 4 bps to 5bp and the 30 yr fell 8 bps to 74.
–While US stock futures are up slightly, it’s worth revisiting a MacroTourist note about QT. https://www.themacrotourist.com/posts/2018/05/15/qt/
About $28.50 billion treasuries are maturing today. As the Fed is trimming re-investment, days with large amounts of maturing bonds are supposedly associated with down days in stocks. There are a lot of other crosscurrents at the moment, so I am not sure how important this factor is, but perhaps something to keep in mind. Here’s a link with maturing coupons in SOMA (click on t-note and t-bonds tab). Also worth noting that total treasury issuance is expected to soar along with the deficit.
https://www.newyorkfed.org/markets/soma/sysopen_accholdings.html
–AAPL releases earnings today after the close, perhaps of more importance given the decline in FAANG. The AP reports that Samsung missed expectations for Q2 with lower than expected earnings, “indicating an end to its streak of record-breaking financial results as sales of smartphones and display panels slowed.” Possible omen for AAPL?
–Once again there was a buyer of back month long dated ED put ratio: +30k EDM21 9625/9575 1×3, selling the bottom strike for a credit of 1 bp. This one looks like a roll-down with open interest -23k in 9625 and up 89k in 9575 (to 208k). There are now more instances of trades taking the other side, for example yesterday a buyer of EDZ0 9600p 4x covered 93, 20d vs selling 2EZ put 9675/9650 put strip. On the treasury side there was a new buyer of 15k TYV 120.5/121.5/122.5 c fly for 5 (settled there ref TYZ 119-055).
–China’s currency continues to weaken, 6.8341. Deflationary? A counterweight on protectionism and tariffs perhaps… In any case, Russell index closed right on the low yesterday and as of this morning is unch’d while ES and NQ are slightly positive.
