March 6. Global trade is dominant theme
–Having rallied after the Italy election results, treasuries all closed down on the day. Ten year yield ended 287.9, up 2.6 bps. Once again there was heavy buying of TYJ 120/119.5 put spread on a roll up, paying 9 to 10 covered 120-125. Open interest rose 31k in 120’s to 159k and fell 20k in 119.5s to 162. Put spread settled 13 vs 120-01. In dollars there was a buyer of 100k EDH9 9675p for 1 covered 9741 to 9744. In the past week there was large buying of EDZ8 9725/9712ps for 1.75, which is a 4-hike play; the EDH9 puts are 50 bps lower, so perhaps a bit aggressive.
–EDZ8/EDZ9 traded as low as 30 but came back to settle 33, +0.5 on the day.
–Focus continues to be on trade tariffs and adjustments with NAFTA. The EU is readying retaliatory tariffs. Canada dollar weakened to a new low against a backdrop of worsening news. For example, Armstrong Economics notes that Foreign investment in Canada has dropped 26% due to measures taken to curtail China’s property buying and also due to diminished capex in the oil industry (thanks Marco). An article on ZH notes heavy household debt loads in Canada. Like everyone else, I’m waiting for a bounce to sell.
–Kuroda softened the talk of BOJ exit (if inflation achieves the 2% target). News in the US today includes Factory Orders, expected +1.7. Fed Governor Lael Brainard speaks at 7:00. Though she mostly leans to the dovish side, the last voice of the “Yellen Fed”; her speeches are always even-handed.
