April 26. No bond sellers. ‘You can be bearish, just don’t be short’
–Interest rate futures rose Monday on light volume, with new lows in several near eurodollar calendar spreads. For example, EDZ1/EDZ2 fell 5.5 bps to settle at 113.5. There were weekend reports that China intends to dramatically cut its dollar reserves. This news (along with anticipated end of QE2), should have been negative for bonds, and on a light volume day, one could be excused for thinking the downward push might be exaggerated. The important takeaway is that there are NO SELLERS. A shift in the tone of the economy toward renewed weakness seems to hold sway, even though stocks remain strong and commodities signal inflation. For example, silver traded in a $4 range yesterday…ten years ago the PRICE was around $4!
–Today the treasury kicks off auctions with 2 year notes. The five year tomorrow will be pushed up in terms of time, in order to accommodate the first ever Fed press conference after the FOMC announcement.
–From comments to the Dallas Fed regarding its survey (as posted by ZH) there was this note, which makes perfect sense and is a longer term positive for US mfg, though perhaps also somewhat inflationary…
“The recent Japan supply chain disruption has increased concern for diversification in the supply chain to minimize risk. Higher transportation costs along with the need to reduce cycle time favor manufacturing being close to the distribution channel. This increases opportunity for North America manufacturers. Increased manufacturing increases job creation.”
