June 8. Strong Consumer Credit report Friday afternoon

–Consumer credit was up another $20.6 billion in April (data released Friday), but the interesting part is the surge in revolving credit which had been sluggish…it was up at a rate of 11.6%.   (Doesn’t really square with the weak retails sales report that came out in April, but perhaps Thursday’s report will be a blockbuster).  The only real deleveraging since the onset of the crisis occurred in the household sector, could it now be changing?  The Financial Obligation Ratio for households [Household debt service payments and financial obligations as a percentage of disposable personal income] at the end of 2014 was 15.27%, close to its lowest level in the past 35 years.  Low has been 15.04 and high 18.09.  The story is different with corporate debt, which is at record levels and growing.
–Friday’s employment report solidified expectations of a rate hike this fall.  Some of the near one-year calendar spreads were able to close at new highs.  For example EDZ5/EDZ6  closed +5.0 to 90.5, though last month’s range has been pretty tight at just 79.5 to 90.5. EDZ5/6/7 fly closed at 22.5 with EDZ6/EDZ7 at 68, up 2.  There is a large long position in EDZ6/7 from the low 60s.  Ten year note yield closed at 240, up 9.3 bps, through the 50% retracement level (233.5) of the 2014 high of 303 to the 2015 low of 164.  The 61.8 retrace is 250, which should provide strong resistance over the short term.
–Turkish lira at a new low on surprise election results, but new lows as well in the ringgit and rupiah.  China exports fell just 2.5%, better than expected, but imports plunged 17.6%.  Echoes of the 1997/98 Asian crisis...

Posted on June 8, 2015 at 5:16 am by alexmanzara · Permalink
In: Eurodollar Options

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