May 7. Rates sit as other markets fluctuate
–Crude oil above $70/bbl (CLM 70.42, +0.70) as the fate of the Iran deal looks increasingly shaky. The dollar continues its surge with EUR 1.1925, having been as high as 1.24 in mid-April. An article on ZH citing BAML notes that S Korean export growth turned negative, a warning sign for global trade.
–Not much of a market move on Friday’s employment data. Implied vol remains pinned at the lows without much of a catalyst in sight. Stocks soared Friday and are a bit higher this morning.
–May euro$ midcurves expire Friday. SOFR futures begin trading today. Auctions of 3, 10 and 30 year treasuries may be a challenge this week.
–Back end of the dollar curve is flat, with green/blue pack spread (3rd to 4th years) at only 2 bps. The six month spread EDZ0/EDM1 is inverted at -0.5. All contracts through the golds behind EDH20 (which settled at exactly 9700) are within 10 bps of 3%, suggesting the market sees a ‘terminal’ FF rate of 2.5 to 2.75%, essentially 100 bps higher than the current Fed effective of 1.70.
- “South Korean export growth, a notoriously good global cyclical indicator, turned negative for 1st time since 2016.”
