–An afternoon headline that said the administration was considering more tariffs on China if Trump-Xi talks fail sent stocks tumbling to new lows yesterday.  it’s easy to conclude that a deal at the G20 at the end of November will therefore cause stocks to stabilize and rally, but even it that were to be the case, there are likely to be bumps in between.  For example, the Fed’s balance sheet adjustment accelerates this month with the roll off of over $22 billion maturing issues.  Table below is from website showing Fed’s holdings, 4th column shows maturing amts:  Note that the Fed’s schedule is now at a rate of $50b/month.

10/31/18	912828T83	0.750	1,571,797.0	5.70%
10/31/18	912828WD8	1.250	3,542,000.0	10.12%
10/31/18	912828RP7	1.750	17,812,617.0	59.17%

–In any case, the decline in stocks didn’t spark much of a flight to quality bid in treasuries.  The ten year rose 1 bp too 3.083% while the euro$ curve was down 2 to 3.5 from the reds back.  DJIA has fallen 10% from the high set in the beginning of the month, and the magnitude of the move is similar to the plunge in early February, though that event was more tightly compressed in terms of time.

–Vol moving forward on the ED curve.  A couple of months ago, blue midcurve straddles were nominally more expensive than greens.   Yesterday there was a seller of 3EU 9687 straddle to buy 0EU 9687, selling blue for 1.5 over.  The Green straddle (2EU 9687^) settled 57.5, 2.5 over the red and 2 bps above the blue.  Not sure exactly how to interpret the change, perhaps the end of the Merkel and Draghi era has something to do with it.