Oct 1, 2018. Bond Bear
–Stocks are rallying and bonds are down as a new Nafta agreement was inked. Canada dollar is seeing a strong run higher while gold is below 1190 and appears vulnerable to new lows.
–Rates eased on Friday though net changes were small. Curve steepened late. For example, 5/30 jumped 2.7 bps to 25.1, as the 5y fell 1.5 bps and the 30y rose 1.2. USZ8 is pressing lower, now 139-25 against a low last week (low of the move so far) of 139-17. The Fed’s balance sheet normalization program kicks up another $10 billion per month in Q4 to $50 billion per month, while the ECB further pares back its buying. The 3.25% yield level on the 30-year bond has acted as a cap since 2015. See chart below. A close above should cause the yield to vault to 3.50/3.55 quickly. If this action should develop, red/green and red/blue pack spreads will certainly move from negative to positive values.
–ISM Mfg today expected slightly lower at 60.3 from 61.3. Bostic and Rosengren speak.
