Russian hacks spark reflation!
June 30, 2021
Little change in yields Tuesday, with tens unch’d at 1.478% as we head into payrolls on Friday. We get a hint with ADP this morning, expected at 600k. There is also a grain report, with futures trading slightly soft currently (Where in the hell is Beeks?). One trade of note was a buyer of EDZ2/EDZ4 at a price of 105 (settled 104.5, 99.47 vs 9842.5). Several large clips of this two-year calendar trade have gone through as Morgan Stanley reportedly recommended it. The FT reports today that several hedge funds were burned on reflation trades by the hawkish FOMC. Pretty obvious by price action, which has now probably run its course if the mainstream financial press is highlighting it.
–At 4:00 a.m. EST something appears to have spooked equity futures, with one colleague pointing to comments from ECB’s Panetta that the delta variant is outweighing confidence in global growth. Some also point to a Bild story about a major Russian hack attack on German banking infrastructure. There is a slight bid in US treasuries, though there was some notable buying in US puts late, including 2k of US week-1 (expires Friday) 158p for 5/64’s. On the FOMC release, the contract traded 157-12. In tens there was buying of Week-1 131.5p (settled 2) and in Week-2 a buyer of 15k 130.5/130ps for 2. Again, markets will be thin on Friday afternoon going into the holiday weekend, but the CME, in its wisdom, remains electronically open until 5pm EST.
–On a more granular level, a friend tells of a small US manufacturer of steel specialty cables. This business has been running flat out due to strong demand, but a hack in the past week caused a halt to operations. This is a recurrent theme that takes time and money to protect against. It is an increased input cost across business that is rarely mentioned in the ‘reflation’ story, and judging by news reports, is not transient.
