August 31. Change of season

–Yields eased Thursday as emerging market stress intensified with a new plunge in the Argentinian peso.  Ten year yield fell 2.3 bps to 285.9.  Red through blue Eurodollars all +3 on the day.  Volume was light.  Late in the day Trump threatened additional tariffs on China, triggering an immediate offer in stock index futures, but losses were fairly well contained.  PCE Core yoy prices were at 2.0%, right on target.

–This morning Chicago PMI is released, expected 63.0 from 65.5.  University of Mich Sentiment and Inflation expectations also out.

–Activity was light in front of the holiday weekend.  As an interesting(?) side note, last year Labor day was on Sept 4.  The employment report was Sept 1, and showed a gain of 156k in NFP. Vs expected 180k  TY settled 126-305 on the day.  The yield was 2.17%.  This is when tensions with N Korea were at a fever pitch.  The following Friday on Sept 8, the contract put in its high at 128-035 (ten year yield 2.06%) and hasn’t been close since.  Pivotal time of year?  ES1 was 2450 and is now 2900, about 18% higher even as the ten year yield is up 80 bps.  The holiday weekend and change of season can presage a shift in market sentiment as well (more likely in stocks this time than in treasuries).  Rolling crises in EM provide a backdrop of instability, and weakness in banking stocks and interest rate spreads relating to Italy add to the mix.   On top of that are lingering legal challenges facing Trump.

–Enjoy the holiday weekend.  Employment report next Friday.
Posted on August 31, 2018 at 5:10 am by alexmanzara · Permalink
In: Eurodollar Options

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