Jan 14, 2016. Redistributing pain
–ESH minis had an outside day covering the previous two sessions (new high in the morning) and closed on the low without a significant bounce all day. The ten year auction was well received at 2.09% and yields pushed even lower into the end of the day, lowest yield since October. The five year yield closed 152.6, essentially at the halfway back level from the mid-Oct low of 1.27 to the end of year high at 179.3. (50% is 153.2).
–All ED calendar spreads again made new lows. For example EDM16/EDM17 (I mistakenly wrote EDM7/M8 yesterday) closed at a new low of 41 bps. The M/M/M fly has plummeted from +20 to just +4 bps since the beginning of the year, a violent move. The rally in this fly since October from 5 to 21, has been completely wiped out in a week and a half. The Fed needs to stand up and take notice what the market is saying. I guess Evans finally did, though he’s been a lonesome dove for a while, saying China makes him nervous and that inflation expectations might not be firmly anchored. Yesterday EDZ6 100 calls were bought for 0.5 bp in size of about 40k, a bit over 100 bps out of the money, a reminder that the US might not be immune from negative rates.
–As usual, there were rumors of forced selling and margin calls yesterday. Canada and Mex Peso again made new lows against the dollar.
–Speaking of Evans, the Chicago Fed is right across the street from the Chicago Board of Trade Building. That will be a good vantage point to watch the protesters attempt to block entry to the trading floor tomorrow.
“We want people to know that poor people across this city are in pain, so we look at this as a redistribution of that pain,” Livingston said. “Since the mayor has made it clear he only listens to the monied interests in this city, we’re going to take it straight to them.”
The protest “…will aim to prevent “billions” of dollars of trade profits from flowing through the downtown center.” Really? ALL the floor guys were short?
