The taper report
October 8, 2021
–Going into the ‘taper’ employment report, with oil near new highs and yields at their recent extremes. NFP expected 450 to 500k, which should be adequate to guarantee the onset of taper in November. Attached is a chart of the US 5y yield, 1.02% late yesterday and printing 1.04% this morning. Tens added 4.8 bps yesterday to end at 1.569% at futures settlement; TYZ settled 131-125 but immediately slid another few 32’s, trading 131-07 now. New highs in a couple of the near eurodollar one-year calendars, with EDZ’21/EDZ’22 rising 3 bps to 36.5. The peak one-yr is still EDU’22/EDU’23 at 71.5. CLX is above $79/bbl this morning as the idea of releasing oil from SPR (strategic reserves) was reversed.
–In late September the last gold euro$ contract (20th quarterly, now EDU’26) fell below 9800 with settles of 9796.5 and 9797.5. It now prints 9795. High yield for US tens this year has been around 1.75%, 18 bps away from yesterday’s settle which is about 1.5 points in futures, approximately 129-29. Good size buying in TYX 131p yesterday; settled 20/64 with an increase of 26k open interest. TYZ futures added 37k new positions, indicating hastily placed downside hedges. Again, fives are already at new highs for the year.
–NFP below 400k would leave a question regarding taper, but given what appear to be increasing inflation pressures, the week’s high of 132-08+ is likely safe.
