May 7. RBA cuts rates. US 3 year auction

–Very quiet session Monday, though there was grudging downside follow through from Friday’s employment sell off.  Red/gold euro$ pack spread settled at new high just above 158.5, up 2.625 bps on the day.  Ten year note gained almost 3 bps to 1.769, with TYM 132-215 settle, though it is approaching levels that should provide strong support. (Charts below).
–Australia cut rates by 25 bps to 2.75%.  Aussie dollar making new recent low.  Today’s US news includes three year auction, followed by 10’s and bonds Wed and Thursday.
–EDM15/M16 one year spread notched a new closing high of 50.  Large long position from 46 to 47.5.
–The Fed’s Jeremy Stein listed on BBG calendar as a speaker tomorrow at a panel discussing ‘dollar funding and lending at global banks’. Possibly important if he follows up on his early Feb speech regarding overheating in credit markets.  From Feb 7, “…my reading of the evidence is that we are seeing a fairly significant pattern of reaching-for-yield behavior emerging in corporate credit.”  If anything that pattern has become even more apparent.
http://www.federalreserve.gov/newsevents/speech/stein20130207a.pdf
–And, to the prosaic…”The recession caused more car owners to fix and maintain their own vehicles, according to repair site AutoMD. The 2013 DIY Report from the “free online automotive repair resource” found that the number of people tackling do-it-yourself auto repairs hasn’t dropped this year, even though the economy is on the rebound.

–Below is a chart (from late Monday) TYM contract.  The level 132-11 looks to be good support: it is 38% retrace from early March low to last week’s high.  It is the low subsequent to the April 5 employment report (red circle on the right, lows of 132-11 and 132-105) and it is the high at the end of March, a few days after the Cyprus deposit grab news.  Below that is a yield chart of ten year note; 38% retracement there is 1.79%.  $/Val bp in tens is around $81.50 in the TY contract.TYM_May13

 

 

 

 

Posted on May 7, 2013 at 5:38 am by alexmanzara · Permalink
In: Eurodollar Options

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