July 15. Curve steepened yesterday as the treasury concluded the 30-yr auction.
July 15. Curve steepened yesterday as the treasury concluded the 30-yr auction. The auction yield was at 4.197, but by the end of the day it had moved to 4.24 and now 4.26. 2/10 treasury spread jumped 6 bps to 258. Red/gold pack spread was up 6.75 to 283.
–Option flows seemed to mainly be exit trades, Buyer of 25k EDH2 9962c for 6 and a seller of about 20k E2Z 9837c (in keepeing with steepening theme).
–During yesterday’s session there was a report that a debt agreement had been reached with $1.5 trillion in spending cuts, however, this is part of a fallback plan in case the two sides can’t come to an agreement. Both stocks and bonds trended lower afterwards, which may portend direction in larger magnitude if a debt agreement fizzles. If both stocks and bonds begin to decline in earnest, the Fed will be in a bind… I bought some August bond puts yesterday, which expire in one week on the same day that some feel is a deadline for debt negotiations.
–EBA (European Banking Authority) stress tests results to be released starting this afternoon, though Bloomberg reports that they were unwilling to test for a Greek default that many find inevitable.
–July midcurves expire today.
–News today includes CPI expected -0.2 with Core +0.2. Empire State expected 8.0 from -7.8. Industrial Production +0.4 with Capacity 76.9. Consumer Sentiment 71 from 71.5.
