July 1. Yields plunge

–Plunge in US yields to new lows on the long end with tens getting just under 138 bps vs yesterday’s close of 148.7.  The ‘authorities’ responded the only way they know how yesterday, with looser, or the promise of looser policies.  The European Commission apparently approved Italy’s plans to support its banking system with €150 bn. (probably too small).  BoE’s Carney hinted at easing measures.  The ECB said it’s “considering looser rules for bond-buying that might include moving away from a link between purchases and the size of a country’s economy.”  In other words, anything goes.  This is either an over-reaction, or a tacit admission that the financial industry is hanging by a thread.  Somewhat unnerving in either case.  Precious metals have responded by exploding higher.   The silver contract started this June around $16 oz and is starting July 20% higher, (now around 19.25).
–There was heavy buying in EDZ16/EDZ17 yesterday morning up to 18.5, but by the end of the day it had settled right at its low of 15, and has pushed lower yet this morning, around 13.5.
–ISM today expected 51.5.  However, the ‘economic fundamentals’ have gone out the window in terms of their relationship to market moves.  However, it’s worth noting an item by Nick Colas of Convergex, in his Off the Grid indicators:

“Large pickup truck sales are down year-over-year. This is one of our favorite indicators of small business growth in “Real America” (i.e. not coding the latest food delivery or dating app).  May sales were down 3.1% from last year, one of the worst comparisons since mid 2011.”

Posted on July 1, 2016 at 5:28 am by alexmanzara · Permalink
In: Eurodollar Options

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