Normalizing rates as the hinges come off everywhere else
February 4, 2022
–Suddenly the ECB woke up to the risks of inflation which sent the european short end into a tailspin. Wednesday to Thursday changes: Schatz up 12.6 bps from -45.8 to -33.2, and it had been as low as -64 on Jan 26. The bund went from 4.2 to 14.2 bps (it was -7.4 on January 26). The red euribor pack settled down over 20 and was printing -22 late. Looks like a coordinated central bank hike fest, just as economies slow. EDH2/EDH3 made a slight new high of 113.5. But ERH2/ERH3 surged 19 bps to 75.5 and SFIH2/H3 was down a few but still closed 79.5. A least three hikes everywhere.
–Massive TY put selling on Thursday. -15k TYJ 125.5p 15 to 14 (18s OI -5k). -20k TYJ 125.0p 10 (13s OI -3k), -15k TYJ 124.5p 7 (9s OI -1k). -25k TYH 126p at 4 (5s OI -20k). TYH 127p settled +7 at 17, with 260k now in open interest, down 17.6k.
–Payroll report today expected 135k, but there is plenty of chatter of a negative number on the back of ADP and the administration’s cold water hints (…that the Russians have infiltrated the BLS).
–New low settles in both HYG and JNK (Hi-yield ETFs, with yields of 4.14% and 4.39% respectively). Credit problems looming?
–Significant new high in CLH2 (WTI) this morning at 91.73, up 1.46.
–ESH surged after AMZN’s post-futures settlement results, but are now only up 9 at 4478.0.
