March 13. This month’s employment report sell off in tens was erased yesterday
–The grinding rally in interest rate futures has now erased losses associated with the employment report. Curve continues to flatten, with red/gold pack spread losing nearly 4 bps to 268.25, hovering near its monthly low. 5/30 is also on its low at 208 as the treasury auctions 30 yr bonds today. Tens saw good demand at 1.4 bps through w/i at 272.9. An early explosion in NYC was initially thought to be terrorist related and sparked a new high in tens, but as reports immediately revealed it to be an accident, the bid in fixed income never really faded.
–China states the obvious. (Reuters) “Chinese Premier Li Keqiang warned on Thursday that the economy faces “severe challenges” in 2014 – comments that came as weak data fanned speculation the central bank would relax monetary policy to support stuttering growth.” Li says “defaults unavoidable. (FT).
–Highest point on the eurodollar curve for one year calandars remains EDZ5/EDZ6 at 104, down 0.5 on the day. Any further weakness in econ data could push every spread below 100. Today’s news includes Retail Sales expected +0.2 and Jobless Claims at 332k. Reuters notes that ten year Irish yields sank below 3%.
–Vol still under pressure. I marked TYK as low as 4.5. There was a synthetic straddle seller in 2EU 9825^ at 54 during the day. Had settled 56.5 the day before. (Settled 55.0).
–In an ironic twist parts of Washington DC experienced a black out yesterday; the Capitol Dome was unlit…this morning the WSJ says “US Grid Vulnerable to Sabotage”. As noted yesterday, Drudge Report ran a story about more frequent attacks on power substations.
