June 2. Surging stocks are no help to treasury shorts

–Fixed income settled only marginally lower despite record highs in stocks.  Once again, the curve edged to new lows for the year.  As ADP came out strong at 253k, July FF were immediately sold, and closed down 0.5 on the day at 9887.5.  While a June hike is considered a lock, the market is loath to price in more hikes, even though the economy is running along at full employment.  For example EDZ7/EDZ8 settled at just 31.5, down 1.5 on the day.  EDH8/EDH9 settled 30…recall a sizable buyer early in the week at 33.5.  All near one-year calendars settled at new lows.

–Illinois downgraded close to junk. Looks like another job for the Fed….but by promising not to disturb the long end of the market, it just makes the pension problem worse and worse.

–Oil getting crushed today with July Crude below $47.  Stocks are building on yesterday’s record gains.

–NFP today expected 182k, but if ADP couldn’t dent the interest rate market, it’s hard to imagine that today’s data will.  Treasury shorts dying by a million cuts.

Posted on June 2, 2017 at 5:19 am by alexmanzara · Permalink
In: Eurodollar Options

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