Loosening conditions
March 11, 2021
–Biden’s $1.9t stimulus package passes…and DJIA makes new all-time high. Treasuries firm going into and coming out of the ten-year auction, with the yield down 2.5 bps at 2.52%. Implied vol crushed as CPI Core yoy prints at only 1.3%, probably the last low inflation data we’re likely to see over the next few months (or years). TYJ atm 132.5^ still settled 1’08 with just two and a half weeks until expiry; not too long ago the atm straddle with four weeks to go was below one point.
–Year to date fiscal budget deficit is up 68% from the year ago level, $1.047T vs $642B. Clearly that’s due to COVID. Of course, there’s a chance that fiscal support has artificially kept unemployment levels higher than they might otherwise be as the economy re-opens. Perhaps the incentives driven by the large footprint of the federal government are undermining some of the very goals that the spending seeks to accomplish. On the other hand, stocks are strong… but USD again turning lower.
–March midcurves expire Friday. 2EH 9950 straddle settled 5.0 vs 9949. News today includes Jobless Claims expected 725k. Thirty year auction today with w/i 224.5 at futures close. April WTI Crude back above $65/bbl this morning. In dollars, greens continue to lead higher, closing +3.875, with blues +3.125 and golds +2.375. Fives led the yield decline in treasuries, -3 bps to 79 bps.
