Feb 1. EDH’16/EDH’17 at just 1/4% in a tightening cycle?!?!
–Strong rally in fixed income Friday as Japan cut to negative rates. Near euro$ calendar spreads made new lows, with March’16/June’16 settling at just 5 bps and March’16/March’17 at just 27 bps, barely above 1/4% for an entire year. Stocks and oil also continued to rebound, though both are giving some back this morning. Five year yield on Friday closed at 133, very near the low end of the range for the past two years; should be strong support around 122-125. Japan’s 5 year yield is plunging, now -13 bps. Given the overt efforts of Japanese authorities to weaken the yen and the huge interest rate differential, one would expect Japanese inflows into treasuries to accelerate. $/yen has moved from 117 to 121.28 (as of this writing) in a couple of weeks. However, the area of 123 to 125.60 is also a major area of resistance for $/yen…essentially the same numbers as five year yield support.
–Today’s US news includes Personal Income and Spending expected +0.3 and +0.1. ISM mfg for January expected 48.3 from 48.2. And Stanley Fischer speaks at 1:00 NY time.
–Interestingly, the was a recent Pew Research poll that shows the economy and health care as the top two concerns of voters. It doesn’t seem as if Obamacare has alleviated concerns over high health care and insurance costs, a point driven home for many individuals with premium hikes in the new year.
