August 4. New lows curve and industrial materials/ oil

–ISM was slightly weaker than expected at 52.7.  New export orders fell 1.5 points to 48.0 for the 5th sub-50 contractionary reading of the last 7 months.  However, the larger story continues to be the plunge to new lows in oil (late CLU -1.80 at 45.32) and metals, and the strength in the dollar especially against EM.  Though AAPL fell below its 200 day moving average, the large stock indexes are still holding amazingly well.  In other economic news, auto sales printed at a strong 17.46 million unit annual rate, the result of cheap gas and extended financing terms. In 2011 (according to Fed’s Consumer Credit report), cars were financed at 4.4% for 61 months, with an avg $25121 balance.  Since then all figures have risen: 5.2% for 65 months, $27272.  The net effect of lengthening the terms is that monthly payments are nearly identical: $460/mo to $482.
–In terms of yesterday’s interest rate market action, the ten year yield fell another 5.7 bps to 214.8.  The curve flattened to new lows.  Red/gold eurodollar pack spread fell 4.75 bps to 129.  2/10 treasury spread down a similar 4.6 bps to 148.7.  Some of the specific deferred spreads like EDZ6/EDZ7 that had been heavily accumulated (in the low 60’s) closed at new lows.  EDZ6/7 settled 59.5, having been as high as 70 recently.  Red/blue euro$ pack spread settled just under 97 bps…very low for 2 year spreads given even moderate growth.
–Factory Orders today expected +1.7.

Posted on August 4, 2015 at 5:21 am by alexmanzara · Permalink
In: Eurodollar Options

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