Stalled negotiations
December 3, 2019
–Yields rose and the curve steepened yesterday, even as stocks fell with the prospect of stagnant trade talks and slower growth. ISM Mfg yesterday was only 48.1 and Prices were soft at 46.7, both weaker than expected. The ten year yield rose 5 bps to 1.826%, though it’s reversing some of that rise today as Trump said that a China trade deal may have to wait until after the election.
–Yesterday, 2/10 rose 4.4 bps to 21.8, 5/30 was up 3.7 to 62.2. Red/gold euro$ pack spread posted a slight new recent high at 21.625, +2.125 on the day.
–Feb/April FF spread settled -4.5 bps, but will likely to begin to invert further if stocks continue to be pressured by year-end profit locking. There’s a fairly large open position consisting of long EDM0 9850/9875cs vs short 9837/9825ps in size greater than 100k. Yesterday the put side was covered in size of 20k (7.0 paid cov’d 9837.5) and overnight 20k of the call spread was sold at 5.0 vs 38.5.
–The calendar is fairly full over the near term in what should be less liquid conditions. FOMC one week from tomorrow on 11th. China tariffs set to ratchet up on Dec 15. Employment report is this Friday.
–Chart below is Dec’19/Dec’20 Euribor spread, traded positive for the first time since summer.
–Trump threatening to tax champagne and other French products in protest of the digital tax. This is the most damaging of all. Because, without fine champagne (no one can long resist the lure of those delicate bubbles…) Christopher Walken would have been unable to make, ‘The Continental’
https://www.nbc.com/saturday-night-live/video/the-continental/2869208
