Jan 5
Red eurodollars had a strong rebound yesterday, closing up 10.5. The curve steepened aggressively, with red/gold pack spread up nearly 11 bps. Ten year yield was unchanged at 3.84%. 2/10 spread up 5.5 to nearly 276.
–ISM, though stronger than expected at 55.9 only caused a minor setback in the front end eurodollar rally. For example, at the release time EDZ traded from 9852.5 to 50.5 but then closed at 9858. It was the fifth consecutive monthly gain for ISM. Today news includes Factory Orders expected +0.4%.
–Everything rallied as the dollar depreciated. Stocks, gold, commodities all joined in a one way trade. While the Fed has whispered about exit strategies, the market still perceives an overabundance of liquidity. Even near Fed fund contracts were able to tack on a bp.
