April 5. Declare the pennies on your eyes.
–It’s a risk off morning with ESM -17 as of this writing to 2040.50, and $/yen at a new low of 110.41. Interest rate contracts are rallying, with the Green pack (3rd year) up 5.75 bps. The possible failure of the Pfizer Allergan deal due to new Treasury rules to curb tax inversions is likely one reason, and newly inspired tax collection efforts as a result of the Panama Papers leaks probably doesn’t help. Nor does weak oil, etc.
–Today’s news includes Internat’l Trade expected -46.2, JOLTS and ISM non-mfg expected 54 from 53.4. As noted previously, the employment sub-index has been weakening in both mfg and service ISM, and the Fed’s Labor Mkt Conditions Index released yesterday was -2.1. This index has been on a decline as well, and hasn’t been this low since the middle of 2009. Perhaps that’s one reason the market immediately dismissed Friday’s solid payroll report.
–Implied vol continues to seep out with FVM at just 2.9 and TYM at 4.6. Not much change in the curve as green pack was the outperformer, up 3.25 bps, while golds were +2.0. The spread mentioned yesterday, April/October FF, settled at 14.75, so 0.75 bp cheaper than yesterday, as the market continues to squeeze out rate hike prospects (Time period encompasses FOMC meetings in Apr, June, July and Sept). Crude again closed near the daily low yesterday, and is more than $6/bbl off the high print from mid-March, having retraced around half the rally from Feb 11 to March 18.
–The subject line is from the Beatles song Taxman:
If you drive a car, I’ll tax the street
If you try to sit, I’ll tax your seat
If you get too cold I’ll tax the heat
If you take a walk, I’ll tax your feet
