Feb 9. “Disheartened”? Well sure, just look at all the debt coming due…

–There’s a whiff of flight to quality buying in the US as yields continue to fall, featuring a powerful bid in front of the ten year auction yesterday that took the yield down 4.4 bps to 234.4 (auction was 233.3).  Green euro$ pack closed +5.0. Blues +5.75 and Golds +6.25.  Precious metals were also strong with Gold (GCJ) now 1244, up over $100/oz from the low in late December.  However, stocks remain buoyant as global demand for USD assets is underpinned by stress in Europe.  High yield etf’s HYG and JNK give no trace of worry, having generally marched higher since the oil patch scare of early last year; they’re both near new highs.  However, Moody’s put out a note yesterday warning that “An all-time record $2 trillion of US corporate debt comes due in the next five years,”  and further noting “US spec-grade non-financial companies have a total of $1.063 trillion of debt maturing between 2017 and 2021, with $933 billion, or nearly 90%, of this due in 2019-21.”   As companies have loaded up on debt to buy back shares and pay dividends, balance sheets have become diluted, causing some analysts to speculate that the Fed will be constrained from rate hikes as the corporate sector depends on cheap finance.

https://www.moodys.com/research/Moodys-US-five-year-corporate-refunding-needs-reach-all-time–PR_361862

–While it might be unclear in the US as to whether the Fed keeps dripping morphine, the BoJ has no shame…“I believe it’s most important that the BOJ persistently pursue powerful monetary easing.” from BoJ Deputy Gov Nakaso.  Reuters summed up his speech this way. “Bank of Japan Deputy Governor Hiroshi Nakaso said Japan’s economy still needs massive monetary support given overseas uncertainties and stubbornly weak price growth, shrugging off market speculation it may raise its bond yield target this year.

–On the other hand, China is pursuing tighter polices in order to stem capital flows.

–In the US today we have a 30 year auction.  Fed speakers Bullard and Evans also make comments in the morning 9:10 and afternoon, 1:10.  Since Bullard shifted to his ‘rates will never rise because we’re in a static regime’ speech I have no idea why anyone would ask him to give a speech, but Evans is sure to channel the BoJ mantra that Central Banks are the only salvation of other economic agents.

–By the way, new low settles yesterday in near ED one-year spreads with June/June at 47.5, down 1.5 and the lowest since the post-election surge.

Posted on February 9, 2017 at 5:25 am by alexmanzara · Permalink
In: Eurodollar Options

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