Aug 3. New lows oil, copper and CAD
–As of 6:00 NY time, Crude Oil is making a new low, down 70 cents to 46.40, and Canada $ also posting a new low, as is copper. The Caixin/Markit Manufacturing PMI for China fell to 47.8 in July from 49.4 in June, lowest since July 2013.
–On Friday, US yields fell as ECI was only +0.2, the lowest on record. Ten year note eased 6 bps to 220.5, but the five year was a star performer, falling 7.5 bps to 154.7. The green eurodollar pack (3rd year) was up 7.75 bps, with heavy put liquidation, most notably a seller of 100k 2EU 9800/9750/9700p butterflies. (Green Sept EDU7, settled 9826.5, put fly settled 3.25). Red/green eurodollar one-year spreads fell to new lows, with the pack spread closing at just 58.75 bps. January 2016 Fed funds closed +3 at 9964, only 23 bps higher in yield than the just expired July contract.
–Both the punishing losses in commodity prices and the ECI data are causing a re-evaluation of the odds of a September lift off. There’s a good deal of news out this week, capped by Friday’s employment report. Today brings Personal Income and Spending, expected +0.3 and +0.2, with Core PCE prices +0.1. ISM 53.7 vs 53.5 last. Additionally Construction Spending and auto sales are out today. Construction of multi-unit housing has been particularly strong, as a firm rental market spurs a reach for better yields.
