July 8. Interest rate futures were slammed on the ADP report…
July 8. Interest rate futures were slammed on the ADP report at 157k vs 70k expected. Ten year note rose 6 bps to 3.15.
–Today’s employment report has bonds looking vulnerable to higher rates. Prior to yesterday, consensus for NFP was 105k, but DB moved their estimate up to 175 and Goldman to 125 with rate at 9.0%. At this point, sub-110k should provide a small relief rally, but given auctions next week a high number (like DB est) should cause tens to at least revisit 3.21.
–While green eurodollars closed over 10 bps lower, there is still a buyer of E2U 9850/9875/9900c fly for 4.0, adding to position. There is still an open question as to whether the soft economic data in May were transitory due to supply chain disruptions, or something more structural.
–Not much drama associated with ECB rate hike. The ECB decision to accept Portugal’s debt as collateral appears to have alleviated concern of a deeper crisis for now.
