March 7. BIS says faith in Central Banks is waning

–Better than expected NFP sent interest rate futures lower, with the ten year yield up 5.2 bps to 187.9.  This week brings auctions of 3s, 10s and 30s.  Stanley Fischer speaks today to the NABE at 2:30 EST.

–Near eurodollar calendar spreads made new highs Friday.  For example, what is once again the peak one-year spread, March’16 to March’17, rose 4.5 bps to 31.5.  Most one year spreads are holding around 1/4% (28-29 bps), indicating a rather slow pace for any tightening.  Additionally, the 5/30 treasury spread actually flattened slightly on Friday with the five year yield up 5.1 and the bond up 4.4; spread closed 132.2.

–As if Draghi’s job at this week’s ECB meeting wasn’t hard enough, the BIS came out and said that the market’s faith in central bankers is faltering.  From The Times: “The global economy is heading for a storm as faith in policymakers dwindles, according to a stark warning from one of the world’s most respected financial institutions.

The uneasy calm in financial markets last year has given way to turbulence, the Bank for International Settlements, known as the central bank for the world’s central banks, said in its latest quarterly report.”

–From Reuters,  “The Bank of Japan (BOJ) is expected to cut next fiscal year’s economic and price forecasts at a quarterly review in April, sources say, reflecting growing gloom in the bank after its most recent stimulus measures fell on stony ground.” The article further echoes the same theme, “…there is waning confidence that monetary policy is providing an effective boost to the economy.”

–On the other hand, stimulus measures in China must be having some positive effects, because there is a broad upturn in industrial commodities.  China’s reserves were reported as having fallen just $28.6 billion vs expected $40b.

Posted on March 7, 2016 at 5:08 am by alexmanzara · Permalink
In: Eurodollar Options

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