Feb 10. US ten year above 2% as Greek deal nears
US rates rose yesterday as a Greek deal appeared to be at hand, with tens finally breaking through the 2% barrier and closing 2.05%. Improvement in jobless claims was also a factor. Curve was a bit steeper with 2/10 at 178, up 6 bps. Small changes are perhaps pointing the way forward. For example, the fed effective rate started the year at 7-8 bps, now 11. Once again, near one year eurodollar calendar spreads inched to new highs, with June/June at 13.0 and Sept/Sept +2 to 14.0. I marked ten year note to tip spread at 224, the highest since last August. These are modest moves, but perhaps indicate slight erosion in the bullish case for credit. Heavy trade in green and blue midcurve options is now tilted toward put buying and call selling, as those contracts have slipped back from the euphoria spurred by the Fed’s ‘low rates for three years’ pronouncement.
–Today’s news includes Trade data, expected -$47.8 billion. A headline in the FT notes that Chinese imports fell sharply in January…”Data will fuel concerns about Chinese growth.” Of course the focus remains the “on again, off again” Greek agreement, which this morning seems to be shaky.
–BBG reported yesterday that several traders were dismissed from RBS regarding possible manipulation of LIBOR settings; the article also mentions DB and Citi. On balance I would suspect an outcome of slightly higher settings going forward.
