April 8. FOMC minutes and Ten Yr auction this afternoon
–Ten year auction today followed by the FOMC minutes.
–After steepening the last couple of days, the curve pulled back, with 5/30 retracing back to the breakout level of 120. This area should hold, given 30 year bond auction tomorrow.
–The ten year inflation indexed note is hovering just above zero, leading to a new recent high in the ten year treasury/tip spread at 187. Ten year tip yield hasn’t been BELOW zero since it surged into positive territory in May 2013, after Bernanke first hinted at tapering. Real yields are coming down as EU yields push lower and lower.
–Green/blue June straddle spread settled 2.5. 2EM 9837 settled 31.5 and 3EM 9900 at 34.0. About a year ago, green straddles were nominally higher in price. The straddle spreads would appear to support the idea of a steeper curve…possibly associated with the idea that the Fed curtails reinvestment? This article by BBG cites the Feb 2016 principal roll-off and coupon payments as a looming decision time.
–Oil inventories were higher than expected sending crude back down after a strong close yesterday. But if you look at this chart of Illinois gasoline prices, it’s clear that consumers got the benefit of low oil in January, but the second retest of that level in March was associated with higher prices at the pump… [Click back to six month or nine month chart]
