Jan 9. Employment day

–Curve steepened yesterday with tens closing back above 2%, up 6 bps at 201.5.  Red/gold euro$ pack spread jumped 8 bps to close just above 115.  The move is probably best viewed as profit taking in a long downtrend, rather than a change in fundamentals, however, the back end of the curve is still remarkably flat.  The dollar index closed at another new high as euro closed below 118.
–Flows yesterday in interest rate futures were dominated by a few new positions, a buyer of 100k EDZ6 from 9827.5 to 30.5 (settled unch at 9829.5 with open interest up 52k), and selling of five year straddles, notably 10k FVG 119.75^ from 45.0 to 43.5 (settled 44 with OI up about 6k) and 10k Green March 9812.5^ from 36.5 to 35.5 (settled -1.5 at 35.5, OI up 5k in calls).  Suggests no real concern about possible downside, and a steady and slow roll up the curve… in spite of day-to-day data.
–Today of course, employment data is released, with NFP expected around 240k at a rate of 5.7%.
–Sort of interesting to look at Obama’s announcement of TOO FREE YEARS of community coledge (ha, funny right?) for everyone in the context of yesterday’s consumer credit data. Consumer credit was up $14 billion (not so funny).  Non-revolving was $15 billion of that, meaning, yes, that credit card debt actually declined, from $883b to $882b.  Non-revolving credit is STUDENT DEBT and car loans, and the amount outstanding went from $2.400T to 2.415T!!  We know that car sales are strong at a 17 million unit rate, but it’s my thought that households are simply substituting cheap student loan debt, most of which is guaranteed by the govt at high default rates, for high rate credit card debt.  I am not sure of exact amount of student debt outstanding, but I know it’s greater than $1.2T.  Heck, free community college may actually save the gov’t money.  In a way, the $1.2T student debt may be double counting, as the federal govt, (at $13 trillion outstanding), borrows and then lends to students…so they can take classes like this one about Kanye West, http://www.huffingtonpost.com/2014/01/26/college-course-jay-z-kanye-west_n_4661573.html , while the Asian kids study refractal computational physics…or something like that.

Posted on January 9, 2015 at 5:24 am by alexmanzara · Permalink
In: Eurodollar Options

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