Treasury auction test this week
November 7, 2022
–On Friday 10/21, FVZ2 posted a new contract low 105-14.75. It was an outside day with a higher close. By the next Friday it had reached 107-18.25. Last Friday, FVZ2 posted another outside day with a low just above the October 21 low: Friday’s range 105-18.25/106-11.25, with a higher close 106-065. Selling pressure is abating. Same general pattern in TY. The low was Oct 21 108-26+. Friday was an outside day with a low of 110-01+ and a slightly higher settle. USZ had a weak close, but is still above lows from the previous week. Auctions this week of 3s, 10s and 30s will be a big test for treasuries.
–China’s possible end to Covid restrictions is causing a surge in China’s equities and commodities. Gold rallied more than $50. Copper up nearly 27 cents in what appears to be a breakout.
–November midcurve options expire Friday. ATM straddles in 0E, 2E and 3E settled 20.5 bps (ref EDZ3 9498.5, EDZ4 9576.5, EDZ5 9605.0). It is Veteran’s Day Friday. Banks are closed; the screen will be open for some stupid reason. US week-2 119.5^ settled 2’06 ref USZ 119-14. One point in the US contract is worth around 7.5 bps. CPI and thirty-year auction on Thursday. Could things really get pushed around late Friday when no one’s around?
