Nov 4, 2016. Unemployment and the Cubs parade….related?

–Payrolls today expected 173k.

–A few notes about yesterday.  The curve edged to new recent highs.  For example, the euro$ red/gold pack spread rose 1.25 bps to close at a new high 61.75.  2/10 treasury spread rose 2 bps to just over 100 bps.  However, the real signal came from 5/30, which jumped 4.7 bps to a new high of 134.  The Fed has pounded home the idea of gradual rate hikes, therefore any new information that undermines the bid in the long end steepens the curve.  Interestingly, crude oil had another bad day yesterday.  Since late October CL has slid 7 dollars from over 52 to under 45….even this move is not supporting bonds.  (However, I would note that copper has gone in the exact opposite direction having jumped about 8% in the past nine sessions).  Additionally, Italian banking shares and DB are easing back lower, another factor which could add to the idea of financial stress and provide support to treasuries.  And of course, ESZ has closed lower for 8 days in a row.  All of which draws me to the conclusion that the steepening trend is occurring for other reasons, one of which is decreasing confidence in central banks, and another is a possible Trump victory that could lead to increased bond issuance for infrastructure projects.  Note that there is supply next week, 3, 10 and 30’s issued.

–One final somewhat interesting note.  Bitcoin seems to bear some relationship to China in that it has been rallying as the yuan has depreciated.  Yesterday bitcoin made a new high early and had a key reversal: higher high, lower low and lower close with a large range.  Perhaps China is going to stem further fx depreciation in the short term.

–Cubs parade today. Expect 60 degree weather under clear sunny skies.  And beer.

Posted on November 4, 2016 at 5:20 am by alexmanzara · Permalink
In: Eurodollar Options

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