Jan 6, 2011. Huge jump in ADP payroll growth
ADP number showed large unexpected increase of 297k vs expected 100k. Interest rates jumped on the report, sending the 10 year yield up 13 bps to 3.48%. Red eurodollars sank 19 bps. There was huge buying of EOM 9800p from 18 to 19. This put traded 100k yesterday, though about 40k of that was related to a buy of 20k EOM 9850/9800/9750p fly. There was an outright buyer of the puts in size of around 50k. Open interest was up 63k. In fact all midcurve puts had significant rises in open interest. Sustained improvement in the labor market is supposed to be one of the last necessary conditions before the Fed can snug. Friday’s NFP expected 140k. Today’s Jobless Claims expected 412k from 388k.
–One year calendar spreads from fronts to reds made new highs, with EDM11/M12 up a whopping 14 bps to 94.5.
–The yen was crushed vs dollar, with futures dropping 2 big figures. Nikkei is rallying due to yen weakness. However, US equities haven’t been dented by renewed strength in the dollar index.
–Two WSJ headlines this morning: Global Food Prices Hit Record High, and Health Spending Eats Up Record Chunk of GDP (17.6%). From Tuesday’s Fin Times: Rising oil price threatens fragile recovery. It’s not inflation, it’s a rise in the share of spending devoted to needs, a cautionary signal going forward.
