Nov 27. Low rates. Long time. But can we be sure?
–Standout this morning is new high in EUR/JPY to 138.50, it was as low as 131.50 earlier in the month. Maybe it’s not so hard to reach 2% inflation when your currency depreciates 5% in less than a month. Nikkei futures not quite at new high, but close.
–Stubborn bid in US interest rate futures yesterday, which eased right after the pit close. As of pit close ten year yield had fallen over 4 bps to just under 2.70. Early trade featured curve steepening bias, with a buyer of 12k Jan Bond 129 puts 39-40 (new), though overall volume was light. New lows in some of the near one-year euro$ calendar spreads, for example June’14/June’15 fell 2.5 bps to close at exactly 1/4% (25bps), pushed lower in part by continued put selling on the EDM’15 contract. I saw in a BBG article that Spanish 2 yr yield has fallen to a new low as the ECB considers another LTRO (long term repo). Sort of ironic that EU banks will thus be encouraged to load up on more sovereign debt just as the ECB’s stress testing occurs next year. Weidmann has been an outspoken critic of the concentration of sovereign debt on bank balance sheets. On a somewhat related note from Pimco’s twitter account yesterday, “In a world of uncertainty, what PIMCO is most certain of: Policy rate at 25 basis on 12/15/2015”. I guess selling puts is free money, right? Who’s with me? Mental image of Will Ferrell streaking in Old School.
–A lot of news out today including Durables -2.0, Jobless Claims 330k, Chgo Fed Nat’l Activity 0.20, Chgo PMI 60.5 (after last month’s surge to 65.9) and the 7 year auction.
