July 10. China’s trade data reflects slack global demand

–Today brings the US ten year note auction, FOMC minutes, and late in the day at 4:10 NY time, Bernanke speaks followed by Q&A.  There is little reason to backtrack on the idea of modest tapering in September since the damage has already been absorbed.
–Yesterday saw a big drop in EUR, threatening April’s low, as Asmussen said that an ‘extended period’ for low rates was over a year (even though Draghi specifically avoided putting any sort of definition on the amount of time). Downgrade of Italy by S&P accelerated the move.  Strength in the dollar index has previously been correlated with negative reaction in equities, but stocks went merrily higher through the day.
–Ten year yield edged a couple of bps lower to 2.625 in front of today’s auction.  In May the 10yr auction yield was 1.81, in June 2.209.  Implied vol was marked significantly lower, with TYU 125.5 straddle falling from 2’38 to 2’26 (7.3 to 6.9 vol).  Lower vol suggests that fear of a new leg lower in treasuries has subsided.  The curve flattened in conjunction with lower vol, with red/gold pack spread down 5.25 to 276.
–China trade data released today was soft, the worst yoy performance of exports since 2009 (ZH), with WSJ calling it a reflection of slack global demand.

Posted on July 10, 2013 at 5:51 am by alexmanzara · Permalink
In: Eurodollar Options

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