May 14. Treasury yields falling. Blackhawks beat Wild to take series.
–Weak Retail sales data pushed yields lower, reversing Monday’s fixed income sell off. Ten year fell 4 bps to 261.5. Green euro$ pack was up 5.5; large early buyers. Near one-year calendar spreads made marginal new lows. Notably, EDH5/EDH6 fell 3.5 bps to 90. There was heavy trade (50k) in EDH5/6/7 butterfly at -17/-16.5. Settled -17, range over the past month and a half has been -20 to -3.5. This morning’s prelim open interest shows a drop of 60k contracts in EDH5 and rise in EDH6 of 73k. Given recent activity (heavy buying EDZ5 and EDH6 outright), and new low in H5/H6, I think the fly trade was a sale. Good carry as the fly in front (Z/Z/Z) settled -42. H5/H6 printing 87 this morning.
–I would also note that EUR/JPY has pierced the 140 level as expectations grow for ECB easing; possible risk-off signal. EUR/USD has bounced slightly off yesterday’s test of 137.
–Having traded with an underlying bid throughout yesterday’s session, tens and bonds are breaking out to the upside this morning. Yield spread between German bund vs US ten yr has been near 5 year high of 123 bps (yesterday at 119), and now looks as if it might narrow. News today includes PPI expected +0.2 both core and headline.
–Crude oil gained 1.28 yesterday to just over 101.50. This year’s high of 104 likely to be tested.
