Dec 1. Flat as a pancake

–Overall yields didn’t change much Monday, but the curve flattening has been relentless.  New lows in 2/10 treasury spread to 128.7, down 1.5 bps and red/gold euro$ pack spread at 99.0, down 4.25 on the day.
–Green, blue and gold midcurve atm straddles are all around 14.5 bps, once again appearing cheap in front of Yellen and the ECB and payrolls.
–Chicago PMI yesterday was just 48.7.  It had a lower mark this year in Feb at 45.8, but in this calendar year, it is as low as its been since 2009.  (Another “lowest or highest” since the crisis of 2008/09, not a good sign).  By the way, in 2009 it hit 33.1, so at least it’s well off that level.
–Below is a comparison of December euro$ contracts across the curve demonstrating the huge flattener since the last employment report.  I have taken the Thursday close prior to NFP, then the close on employment day, then yesterday’s close:

EDZ5 9958.5 9955.5 9953.0 -5.5
EDZ6 9892.5 9884.0 9888.5 -4.0
EDZ7 9837.5 9823.0 9836.0 -1.5
EDZ8 9798.0 9782.0 9802.5 4.5
EDZ9 9768.0 9752.0 9777.5 9.5
EDZ0 9741.5 9726.0 9754.5 13.0

I hope the table comes out, but if not, it shows EDZ6 having gone from 9892.5 to 9884.0 and now back to 9888.5, -4.0 net change.  While red dec is down 4, gold dec is UP 9.5 over the same time frame.
–Data from China is apparently mixed this morning, but the prices of iron ore and steel show an unambiguous picture of decline.  Jan crude remains under $42/bbl.  And now that China has been admitted into the SDR, (delayed) depreciation of the yuan is likely to follow.

Posted on December 1, 2015 at 4:56 am by alexmanzara · Permalink
In: Eurodollar Options

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