Sept 11. Treasury auctions over. Risk off day
–Curve steepened a bit as the treasury wrapped up auctions with the 30 year bond. The ten year yield was up 3.2 to 222.4, while 2/10 treasury spread rose 4 to 149. Red/gold euro$ pack spread up 3.75 to 134.625. September midcurve euro$ options expire today.
–US stocks were weak early yesterday as Appaloosa’s David Tepper said that “flat is an ok place to be” regarding US stocks. (He had previously sparked buying when he pronounced himself “balls to the wall long”). However, ESZ closed positive on the day and the chart continues to coil.
–Roubini was out recently saying that concerns about China were overblown, as opposed to RBNZ’s Stevens who said two days ago that he feared China might set off another wave of global deflation with yuan weakness. I suppose it’s much more important to get it right for Stevens, though he might think of the world in a tighter geographical sense than Roubini. In any case, it’s hard to argue with US Import price data yesterday of -11.4%, the lowest since 2009. It certainly doesn’t speak of inflation. Today we get PPI expected -0.2 with Core +0.1.
–Today is the anniversary of 9/11. I would expect the day to lean risk averse. Given that treasury vol is at the low end of the range, may make sense to own some calls as a hedge. Iran has sent ground troops to Syria in support of Russian efforts to save the Assad regime…glad that’s not escalating. Sunday is Shemitah, 7 year cycle mentioned in the Bible and loosely associated with previous financial stress episodes. Might add to ‘risk off’ mentality for today at the margin.
