Guessing Powell Already Knew Retail Sales?

March 11, 2019

–Treasuries slightly weaker this morning, as apparently the only thing that came out of Powell’s 60 Minutes interview is that he expects a rebound in consumer spending.  Retail Sales is out this morning.  After December’s shockingly weak -1.2%, the headline number is expected 0.0, but +0.3 excluding autos.  Three year auction also today.

–Friday’s paltry 20k gain in nonfarm payrolls caused treasuries to surge, but profit taking ensued.  Thursday’s ECB meeting had already sparked a strong rally, and with supply in the early part of this week, further gains might require a new catalyst.  There are large longs in both TYK 122.5 and 123 calls related to last week’s buys of 122.5/124.5cs and 123/125cs.  Any liquidation of these positions in front of auctions could provide a cap on TY. 

–Red/green eurodollar pack spread remains pinned to historic lows, closing -8.625.  The front March EDH9 expires in one week, which of course rolls all contracts forward.  The new red/green pack spread, starting with June contracts, settled -4.375.  The lowest one-year calendar on the curve is still EDZ19/EDZ20 at -19.5, and the cheapest contract on the board out five years is EDZ9 at 9738.5, within a couple of bps of the current libor setting.  The eurodollar curve stubbornly projects a slower economy.  It’s somewhat surprising that back euribor spreads haven’t compressed a bit more, but the heavy lifting might come in the form of a much lower euro.

Posted on March 11, 2019 at 5:15 am by alexmanzara · Permalink
In: Eurodollar Options

Leave a Reply