March 22. Terrorist blasts in Brussels; limited short term impact

–Terrorist blasts in Brussels have had modest market impact so far, with a slight decline in stocks and a muted rally in treasuries.  While the US treasury yields are lower as of this writing, yields pushed higher yesterday, with tens up nearly 5 bps to 191.9.  In eurodollars reds thru golds were down 5.0 to 5.5 bps, though volume was light.  Economic news was soft, with existing home sales -7.1% to 5.08m.  The 3mo moving average of the Chgo Fed National Activity Index has been negative for the past five months; printed -0.07 yesterday.  The thirty year t-bond looks most vulnerable to further weakness, but I saw a chart this morning of the Japanese 40 yr bond…can this be right?  A drop of over 100 bps this year alone to yield only 50 bps!
–Today’s news includes PMI Mfg, expected 52.4 from 51.0.  Yesterday, the Fed’s Lockhart said that a hike is possible in April.  April/May FF spread rose in response.  One basis point.  From 2 to 3.  That’s right in there with Mitt Romney’s influence on Trump voters.  June/July funds remained stable at 4.5.  However, the ten year tip to note spread moved to another new high of 166 bps.  Market based measures of inflation are turning up.  Additionally, note that with the rally in oil, near contracts have substantially closed the gap with deferred.  For example, on Feb 11 (the day when all treasury contracts spiked to recent highs and one-year euro$ calendars fell into single digits interday), the spread between May’16 and May’17 WTI crude was -8.30 (near contract at a discount).  As of yesterday this spread had settled -3.98.  Near term oversupply becoming less of a problem?

–One last note.  AAPL, having rallied for the last month, made a new high early, but had an outside range day and closed nearly unchanged as it announced product changes and price cuts.  Possible short term trend change.

Posted on March 22, 2016 at 5:30 am by alexmanzara · Permalink
In: Eurodollar Options

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