January 15, 2017. Be Careful Brethren!
Early morning, April four
Shot rings out in the Memphis sky.
Free at last, they took your life
They could not take your pride.- U2
https://www.youtube.com/watch?v=O6NAKgv4ALg
There are a lot of inspirational Martin Luther King quotes, but in reviewing them I was struck, not by the most famous and powerful ones, but by some that seem to have foreshadowed our present condition. Maybe it’s simply that they’re timeless.
The function of education is to teach one to think intensively and to think critically. Intelligence plus character – that is the goal of true education.
“If we are not careful, our colleges will produce a group of close-minded, unscientific, illogical propagandists, consumed with immoral acts. Be careful, ‘brethren!’ Be careful, teachers!”
–Above from ‘The Purpose of Education’, Morehouse College Student Paper, 1947
Currently, these quotes relate to the firestorm surrounding fake news. I learned all I need to know about fake news in the markets. One of the lessons that always stuck with me was when I was a kid on the CBOT floor in the bonds. This was of course, in the time when ‘news’ was much more valuable. There were no chat programs that zapped info from a website instantaneously to the entire globe. So when you heard a rumor, you punched the direct phone line of a trader. Which I did once with Mel Swanborn, a veteran gov’t bond dealer. Of course I can’t remember the particular piece of information that I was convinced was so valuable, but I vividly remember Mel’s reaction. And it wasn’t the “Buy 200” which I was expecting. It was this, “Where did you hear that?” “How long ago?” “How did that guy hear it?” “Who’s he with?” Mel knew exactly what he was doing. Now more than ever it’s necessary for individuals to critically judge the veracity of news.
It’s somewhat ironic I suppose that MLK day, now known as a Day of Service, is in the same week as the inauguration. Financial markets greeted Trump’s election with jubilation, but likely overshot, and uncertainty about stimulus plans seems to be creeping in around the edges. For me, that’s most apparent with respect to the Eurodollar curve. But I’ll veer off course for a minute just to mention something that captured my attention this week, and that’s significant buying of Feb VIX calls. As I cited during the week, the strikes are primarily 21 and 22 calls with open positions of 247k and 241k (Friday there was a buyer of 147k Feb VIX 21 calls for $0.50). The last time VIX visited 22 was right around the election: ‘oh no! Trump might win’. Perhaps this time it will be the reality of ‘Oh no! Trump’s being sworn in.’ In any case, I don’t know the exact rationale for the trade, but with Jan VIX at 12.175 and Feb 14.225, there’s significant negative roll for calls to overcome. On the other hand, I can see selling July VIX against long Feb calls for a cheap way to play for the possibility of a risk event, as July should roll down 60 cents to June’s level if nothing occurs. What could spark an event to slingshot near contracts to a premium? China’s President Xi addresses Davos Tuesday, Fed’s Yellen speaks on the goals of monetary policy Wednesday (with Q&A) and the inauguration is Friday. My personal opinion is that China is not bluffing about its ‘One China’ at all costs policy.
Back to interest rates. First, note that net changes on the week were again small. There continues to be significant buying of April ED 9862/9850 put spreads, with open interest in those two strikes ballooning to 246k and 235k. With EDZ6 having expired essentially on the 9900 strike, there are plenty of trades targeting 25 bp increment moves once per quarter, i.e. EDH7 at 9875, EDM7 at 9850 and EDU7 9825, as compared to Friday’s settles of 9892.5 in H7, 9876.5 in M7 and 9863.0 in U7. Clearly many of these trades are binary and dependent on an initial hike in March, which likely heightens interest in Yellen’s comments on Wednesday afternoon. Of course, some clues might be taken from Bernanke’s latest blog regarding how the Fed might handicap upside risks of fiscal policy embedded in Trump’s vision:
Regarding timing: No one knows at this point how long Congress will take to pass legislation—fiscal changes can be both complex and contentious. And, once passed, fiscal programs can take a while to have their effect (infrastructure programs, for example, can take a number of years to build out). Consequently, the impact of new fiscal measures may be felt in 2018 or 2019, rather than this year. Of course, that gives the Fed more time to assess the program and determine an appropriate response.
It seems to me as if the Fed will likely err on the side of caution, as usual. That’s one of the reasons that I am quite surprised by the flattening of the Eurodollar curve, which has occurred consistently since the December rate hike. As an example, the red/gold Eurodollar pack spread (2nd to 5th year) closed the week on the low at 71 which is exactly the halfway back point from the Sept 27 low of 41 to the Dec 12 high of 101.5. (Currently 30 off the high). At the same time, measures of inflation expectations seem to be holding relatively near the highs spurred by Trump’s win.
For example, the chart above is the spread between the ten year inflation indexed note and the ten year treasury yield (white line). This spread is now at its recent high above 200 bps, 80 higher than the start of 2016 which was related to the plunge in oil, and about 30 bps higher than pre-election. I’ve overlaid the dollar index in green. Previously a firming dollar (mid-2014 to mid-2015) was associated with a drop in inflation expectations, a relationship which appears to have diminished significantly.
The USD 5y5y inflation swap forward was between 190 and 200 last July and August, vaulted to 250 after the election, printed over 260 in Jan, and is now 241. The EUR 5y5y inflation swap forward was as low as 125 in September and has had an orderly 50 bp rally to 174 currently. The Bloomberg Commodity index is up over 13% yoy, and the University of Michigan’s inflation expectation index for the next year popped up from a low of 2.2% to 2.6%. Underlying economic data have improved both in the US and Europe.
While the 2/10 treasury spread hasn’t had the same magnitude decline as ED calendar spreads, it’s still down 16 bps from the Dec 22 high (spread currently 119.6). The point is this: the back end of the curve has been flattening in the face of inflation signals that are becoming somewhat more compelling. With respect to Bernanke’s note that fiscal measures might not really take hold until 2018 to 2019 – which might then elicit a more forceful Fed response – consider that the reds to the greens (year 2018 contracts compared to year 2019) are only 34 bps on average, or less than 1.5 hikes.
The treasury market is still subject to flight to quality bursts, so using options to play for steepening is probably the way to go. “Be careful!”
I’ll end with one more MLK quote, especially appropriate for these times:
“Never succumb to the temptation of bitterness.”
Jan 13. Yields edge lower. Protective buying of VIX calls?
–Another quiet day in interest rate futures, though the market is generally accepting the grind to lower yields. There were some large lifts in near eurodollar contracts, and a notable early seller of over 55k EDU7/EDZ7 calendar spreads at 15 (settled there, -0.5 on the day). Total open interest in dollars was up 250k.
–Yesterday evening Yellen, addressing a group of educators, said “short term I would say I don’t think there are serious obstacles. I see the economy as doing quite well.” On Wednesday January 18, she is expected to speak on monetary policy goals in San Fransisco.
–News today includes Retail Sales expected +0.7 and +0.3 ex-auto and gas. PPI expected +0.3.
–China released trade data from 2016, foreshadowing the trend of global trade in 2017. China exports -7.7% yoy and imports -5.5%.
–Though it’s not my focus, there apparently has been some chunky buying of Feb VIX 22 calls in the past few days. Spot VIX is around 11.4 and traded into the low 20’s around the November election. Open interest in Feb 21,22 and 23 calls: 247k, 148k and 132k, fairly large numbers. Feb 22c are around $0.45. Though these options expire mid-Feb, we executed some week-3 mini SP puts yesterday which will cover inauguration festivities (Jan 20 expiration date)
Jan 12. The fading Trump effect
–Once again, little net change in interest rate futures on light volume. Solid ten year demand as w/i was 236 just prior to auction which came at 234.2. Treasuries are once again higher this morning as an underlying bid since the start of the year was only interrupted by the employment report which is now in the rearview mirror. TYH7 printed 125-105 today, same as the brief spike high after the NFP print. The 30 year bond contract at 153-16 this morning is the highest since mid-November (NFP high was 153-09). The press conference yesterday may have dulled the shine of Trump magic for the time being, as USD edged lower. Perhaps more important than Trump was Tillerson’s hearing. Trump has repeatedly bashed China on trade, but his rhetoric can perhaps be framed as a negotiating tactic. Tillerson appears serious and steadfast, and clearly opposes China’s man-made islands: “We’re going to have to send China a clear signal that first the island-building stops and second your access to those islands is also not going to be allowed.” The stage is being set for more than a simple trade skirmish, which could lead to de-risking.
–As a side note there is a program buyer of TYH 127c every morning, 8k at a clip. He has likely accumulated over 100k of the strike which settled 15 yesterday with 18 delta.
–News includes Import Price Index 0.7% and Job Claims 255k. 30 year auction. PPI and Retail Sales on Friday. PPI yoy expected +1.6 but risk is to the upside. Retail Sales for Dec expected +0.7. There are many Fed speakers today including Evans, Harker, Lockhart and Bullard. Yellen speaks about education this evening, not likely to be any policy pronouncements.
–In another sign that the Illinois/Chicago financial crisis is coming to a head, Mayor Rahm Emanuel is leaning on Moody’s to withdraw its junk rating because of the great strides Chicago has taken in raising taxes and fees. It’s not junk if you don’t call it junk?
Jan 11. Sugar highs?
–Mind numbingly boring day Tuesday with little change in interest rate futures. Implied vol eased. There was liquidation of long TYG 123 and 122.5 puts, with open interest falling 20k in the former and 8k in latter. Continued program buying of TYH 127 calls (8k a day). Oil continued to slide to new lows, down 114 late to 5081, at the low end of December’s range. The dollar curve edged slightly lower. If you believe in the Trump phenomenon, with growth and inflation ramifications, then this a pound on the table and shout from the rooftops time to buy euro$ calendar spreads. Sure, they could still decline, but these are good risk/reward levels. For example, red/gold pack spread at 71 is exactly at its 50% retrace from Sept 27 low of 41 to Dec 12 high of 101.5. Green/Blue June notched a new low yesterday at 35.5 (EDM8/EDM9). The March spread in front is 41. Rolls favorably and the absolute level is low in the context of growth and inflation. EDM7/EDU7 is just 13 bps with an FOMC meeting Sept 20. Perhaps expectations are a bit frothy (as indicated by the NFIB small business optimism survey released yesterday that soared to multi-year highs at 105.8/chart below) and the curve is already looking ahead; might get some clues from Trump’s news conference today (11:00 EST). While some have pointed to the actual inauguration as a ‘buy the rumor, sell the fact’ date, today has the potential to preempt that occasion.
–Ten year note auction today with w/i 238 at the futures close yesterday. In a longer term context, Bill Gross cited a rise above 260 as a mark to the beginning of a bear market in bonds, while Gundlach used the year end 2014 high of 3% as his hurdle.
Jan 9. Jobs data sparks slight increase in odds of a March hike
–Yields backed up on the employment report with tens rising 5 bps to 241.6. Hourly earnings were up 0.4, bring the yoy change to 2.9. Today brings the Fed’s Labor Market Conditions index and Consumer Credit.
–There is continued buying of Feb TY puts in good size (expiry on Jan 27, TYG 123.5, 123 and 122 puts). Friday also saw large buying of both April and May 9862/9900 risk reversals in various forms, buying of 9862 puts and selling calls. These trades pretty much require a March hike in order to pan out. There wasn’t much open interest in May options before Friday, but the 9900c, 9862p and 9850p all gained 90k. Settles (May) were 0.5 in the call, 0.5 in the 9850p and 2.5 in the 9862p ref 9877 in EDM7. April Fed Funds settled at 9928, down 1 on the day, suggesting odds a bit better than one in four that the Fed moves in March (FFF7 settled 9935.25).
–Red/gold eurodollar pack spread closed at 75, near the low of the recent range. Back ED curve has been flattening since mid-December when red/gold neared 100 bps. With talk about the possibility of 3 hikes in the coming YEAR, 75 seems a bit tight for a THREE-YR spread, especially given increased inflationary indicators and a Fed that has used the word “gradual” so consistently that it’s hard to imagine the Fed getting out in front of an inflation problem (should it develop).
–GBP near new lows today on May’s comments which suggested the UK may lose access to Europe’s single market. There is also increased tension with China as Taiwan’s president met with US lawmakers. On the economic front, China seems to be faced with the options of selling reserves, or depreciating the ccy, or allowing punishing short term funding rates, none of which are particularly positive for global trade and pricing.
January 8. This is EASY!
The following is from a Stan Druckenmiller speech on January 18, 2015. His comments are fascinating, but I am simply using this small excerpt to make a point. I have included the link to the entire speech below.
After about a year and a half – I was a banking and chemical analyst – this guy calls me into his office and announces he’s going to make me the director of research, and these other eight guys and my 52 year old boss are going to report to me. So, I started to think I’m pretty good stuff here. But he instantly said, “Now do you know why I’m doing this?” I said no. He says, “Because for the same reason they send 18 year olds to war. You’re too dumb, too young, too inexperienced not to know to charge. We around here have been in a bear market since 1968.” This was 1978. “I think a big secular bull market’s coming. We’ve all got scars. We’re not going to be able to pull the trigger. So I need a young, inexperienced guy. But I think you’ve got the magic to go in there and lead the charge.” So, as I told you he was a maverick, and as you can already see, he’s a little bit eccentric…
The other thing he taught me is earnings don’t move the overall market; it’s the Federal Reserve Board. And whatever I do, focus on the central banks and focus on the movement of liquidity; most people in the market are looking for earnings and conventional measures. It’s liquidity that moves markets.
…here’s where the dumb luck came in in terms of my investment philosophy. So, right after he leaves, the Shah of Iran goes under. So, oil looks like it’s going to go up 300%. I’m 25, I don’t have any experience. I don’t know anything about portfolio managers. So, I go well, this is easy. Let’s put 70% of our money in oil stocks and 30% in defense stocks and let’s sell all our bonds. So, and I would have agreed with him if I had some experience and I was a little more experienced, but the portfolio managers that were competing with me for the top job, they, of course, thought it was crazy. I would have thought it was crazy too if I’d had any experience, but the list I proposed went up 100%.
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The first week of the year has closed out. Friday to Friday changes in many markets were modest, though stocks marched merrily higher. The notable change over the week was a tilt toward a flatter curve in the US. There were substantial bets made late in the week indicating that the Fed may be prodded into tightening quicker than expected. On the week, the 2 yr yield rose 2 bps, while 5’s were essentially unchanged, tens -1.7 and 30’s -5.1. Supply in tens and thirties this week.
Implied vol in the front Eurodollar contracts firmed relative to the backs as predicted by an astute option trader, who, in positing this theory a couple of weeks ago, had noted considerable near term uncertainty including Fed policy, Trump, European elections, etc. He thought a price of 14 in the EDM7 9875 straddle was ridiculously low (it settled at 16 Friday) and that EDU7 9862 straddle at 23 was also wrong (ditto, settled at 24).
Friday’s employment release wasn’t too far off expectations, but since yields had generally eased over the previous week, the market read the report bearishly. Sometimes, it’s just this easy: Hourly earnings in the employment report were +0.4, faster than expected bringing the yoy rate to 2.9%. Prices paid component of Mfg ISM was 65.5, highest since 2009 (released Tuesday). On Thursday we had non-mfg prices: ”The Prices Index increased 0.7 percentage point from the November reading of 56.3 percent to 57 percent, indicating prices increased in December for the ninth consecutive month at a slightly faster rate.” M2 is growing at 8%. Let’s not make this more complex than it is. We’re at full employment and the other pieces of the puzzle have fallen into place, higher wages and prices with the FF target just slightly off historic lows. And Trump’s new top economic adviser (Goldman’s) Gary Cohn had this to say in a recent WSJ interview. “We will never have those real conversations, but if we woke up tomorrow and every central bank in the world raised their interest rates by 300 basis points, the world would be a better place. “
Now imagine an inexperienced Rip van Winkle who falls asleep in 1994 and wakes up now. He looks back for historical clues. Back to 1993, just before an aggressive hiking cycle, to see how the data compares with now. 1993 GDP: Q1 0.8, Q2 2.4, Q3 2.0 and Q4 4.5. How about 2016: Q1 0.8, Q2 1.4, Q3 3.5, Q4 2.9 (Atl Fed GDP Now estimate). Pretty close. What about CPI? 1993 2.97, 2016 1.7. OK so where did FF target start? In 1993 it was 3%, and 1 ¼ year later, topped at 6%. What is this inexperienced kid going to do? CHARGE!! Buy all the puts he can! This is easy.
Of course, the world isn’t the same place. My personal view is two hikes in 2017 (because I am ‘experienced’ and ‘scarred’). From a hedger’s standpoint however, protecting against a suddenly aggressive Fed isn’t all that expensive. For example, during the day Friday I put out this comment: EDZ6 settled near 9900 or 1% libor. What if the Fed were to hike once a quarter? Look at buying this strip… EDH7 9887p, EDM7 9862p, EDU7 9837p and EDZ7 9812p as a strip for 14.0 bps. Simplistically, if the market expected 25 bps per quarter, then each of these strikes would settle 12.5 in the money. Friday settles: EDH7 9887p 3.0s, EDM 86p 3.25s, EDU 83p 3.5s, EDZ 81p 5.5s. Total 15.25.
Now let’s get back to Friday’s action, and this note is a bit more specific about particular option trades than most…might get a bit bogged down here. There has been significant put buying in near Eurodollars, which accelerated late Friday. Recent large buys have been EDJ (April, EDM7 underlying) 9862/9850 put spreads 1.0 to 1.5. EDZ7 9825/9800 put spreads for 4.5 to 5.0. Friday there was heavy buying of April and May 9862.5 puts vs selling 9900 calls. In April it was mostly done for 0.5 and 0.75 bp and in May, -9900c, +9862/9850p 1×2 for 0.5. Final settles and open interest changes are on the table below. The point is, heavy, but relatively inexpensive bets are being placed for a hike in March with possibility of another in June. EDJ 9862p/9900c risk rev settled 1.5, and same in May 2.0. Total Eurodollar future open interest rose 240k in confirmation of the bearish price action.
I also included February TY puts that have been accumulated in size, the 123.5, 123 and 122 strikes. One full point in the ten year futures is worth 12.5 to 12.9 bps currently, so as of Friday’s settlement of 124-13, the 123.5p is about 11.6 bps out of the money, reference cash yield of 2.416% (so 123.5 strike should be ~253). As a reminder, tens and thirties are auctioned Wed and Thursday, and Retail Sales are on Friday.
http://www.gurufocus.com/news/329154/full-transcript-of-stan-druckenmillers-january-2015-presentation-to-the-lost-tree-club
| STRIKE | SETTLE | CHANGE | OPEN INT | OI CHG | EXPIRY |
| EDJ 9862p | 2.00 | 0.50 | 160k | 62.3k | 4/13/2017 |
| EDJ 9900c | 0.50 | -0.50 | 87k | 49.0k | 4/13/2017 |
| EDK 9862p | 2.50 | 0.50 | 118k | 91.3k | 5/12/2017 |
| EDK 9850p | 0.50 | 0.25 | 118k | 90.6k | 5/12/2017 |
| EDK 9900c | 0.50 | -0.75 | 91k | 91.0k | 5/12/2017 |
| TYG 123.5p | 19 | 4 | 80k | 22k | 1/27/2017 |
| TYG 123.0p | 12 | 2 | 142k | 17k | 1/27/2017 |
| TYG 122.0p | 5 | 0 | 121k | 1k | 1/27/2017 |
Jan 6. China’s not selling treasuries?
–Employment data today with NFP expected 175-180k and earnings +0.3% which would bring the y-o-y increase in wages to 2.8%.
–In advance of this data treasuries staged an impressive rally, with a surge in open interest (according to prelim data) across the treasury complex. For example, TYH open interest gained 43k and FVH was up 37k. The early notable feature however, was bearish, buying of 70k TYG 122p for 6 to 7, settled 5 ref 124-265, and + 40k TYG 123p for 12-16, settled 10. Open interest rose in both strikes, +50k and +45k. In any case, yields plunged by day’s end and the curve flattened. The ten year yield dropped 8.4 bps to 236.6. 2/10 spread fell below 120, to 119.2 at futures settlement time. Red/gold euro$ pack spread dropped nearly 2 to just under 75 bps; this was the 4th consecutive decline. The spread was above 91 in mid-Dec.
–China is apparently allowing exorbitant money market rates to choke yuan shorts. Someone must have also alerted the monetary authorities that the surge in bitcoin was a reflection of instability in China’s financial architecture, so sell orders have crushed that market over the last two days as well, from around 1100 to 920. It must be a pretty fun job…”sell until I tell you to stop.” On the other hand, if those are the methods being used to shore up the yuan, it means that China is NOT selling USD reserves, which means less pressure on US treasuries, which translates into, BUY, MORTIMER, BUY!! In any case, that’s how it traded.
–With respect to the ten year yield, pre-election it was 178, and then of course soared to 259.3. The low of the year was post-Brexit in July at 136. From the July low of 136 to the high of 259, 0.38 retrace is 212. The post election move of 178 to 259 has 218.5 as the 50% retrace. The point is that this rally could continue to 212-218 and still be a bear market.
Jan 5. China’s Wall…under 7 for now
–Fed minutes yesterday indicate a nod toward the possibility that fiscal policies may spur economic growth, requiring the Fed to respond slightly faster. Not much of a surprise given full employment and market signals of increased inflation. However, yields were unchanged in front and slightly lower in back, continuing the pre-NFP squeeze to a flatter curve. New low once again in red/gold pack spread to 76.75. down 1.75 on the day. 2/10 also notched a new low under 122. FVH7 (five yr note future) has closed near the top of the day’s range for the past five days in a row…there are obvious dip buyers.
–China is crushing yuan speculators today with liquidity withdrawals, with CNY back under 6.89 having been around 6.95. I guess there will be no devaluation prior to the Lunar New Year (27-29 Jan). However, efforts to support the yuan are also likely to harm the domestic economy (and note that one of the Fed’s downside risks is weakness abroad). The dollar is softer this morning as are US rates.
–With respect to the Fed and US growth, it’s worth noting that fiscal stimulus has ALREADY been underway. From Doug Noland, “…the 2016 US fiscal deficit rose a third to $587B, or 3.2% of GDP. Revenues increased by 1%, while spending jumped 5%.” From the Fed’s Z.1 data, Federal Gov’t debt in 2015 grew by 5%. In 2016, growth in the first three quarters: 5.6, 5.0 and 8.2. M2 expanded by about 8% in 2016. Federal government juicing was occurring already in the year just ended; there was just no concrete symbol of economic glory and ingenuity that we could point to, like say, for example, a wall.
Jan 4. Pre-employment squaring
-Yields were mixed Tuesday, as an early morning bear steepener reversed by day’s end. While the 2 yr note rose 2.8 bps to 122.2, tens were up only 1.5 to 243.3 and the thirty year actually fell a fraction of a bp. Manufacturing ISM was stronger than expected at 54.7, with prices paid surging to 65.5, the highest since late 2011. The most wicked reversal of the day occurred in crude oil, which was UP $1.50 early in the session, but traded to a low of 52.11, DOWN 1.60 (settled 52.33). Massive outside day with a close in the bottom part of the range portends further profit taking.
–Moves in the curve echoed oil. As mentioned, the curve was steeper at the outset but flattened by the close. For example, EDH’20 (blue March) printed as low as 97.53, down 9.5 on the day, but closed unchanged at 97.625. This contract was the pivot, everything in front closed lower and contracts behind settled positive. One of the factors supporting blues was liquidation sales of Blue March and Feb put spreads (9762.5/9737.5ps), reflecting a desire to square up prior to Friday’s employment data. Once again, new lows were made in euro$ pack spreads, with red/gold falling 4 bps to just 78.5. USD also reversed from new highs made early in the day.
–News today includes ADP estimated at 172k and FOMC minutes in the afternoon.
Jan 3 2017. Re-set the year
–Friday’s rally in interest rate futures has more than reversed with TYH trading below the 124 handle. Talk of asset allocation out of stocks and into bonds last week has been erased from the memory banks as stock index futures have rebounded from Friday’s drop. What a difference a year makes – last year crude oil was plunging to its lows in January (around 25 to 30), but is up over $1/bbl this morning at 54.90, starting the year off near new highs.
–In August 2015 China’s surprise devaluation sent a tremor through risk markets globally. Since that time, China’s currency has continued to weaken, but pressure is building for another big move. Bloomberg is reporting on new restrictions for conversions of up to $50000 (the annual limit re-set at the start of the year). https://www.bloomberg.com/news/articles/2017-01-03/china-drills-down-into-forex-transactions-as-money-exits-abroad
Zerohedge has an article on punishing drains of liquidity, sending 3month Hibor and Shibor rates to new highs. Bitcoin trades over $1000 and CNY is 6.96 according to Bloomberg’s website. Clearly some of the pressure is related to the re-set of currency conversions as of the start of the year. The point is that there appear to be tensions building both economically and geopolitically relating to China and while dollar assets are immediate beneficiaries, in the longer run that may not be the case.
–Friday’s trade, though quite light, featured new low marks in some curve measures. Fro example, red/gold euro$ pack spread closed at a new monthly low of 82.5 bps, down 3.5 on the day. Green to blue euro$ pack spread settled under 1/4% at 24.5; positive roll is becoming more compelling from these levels.
–Interesting quote from Ambrose Evans Pritchard over the weekend: “World debt ratios are already 35 percentage points of GDP higher today than they were at the top of the last cycle in 2008.”
