Pot luck
June 27, 2019
–Bitcoin is once again providing an interesting roller-coaster side show, as it plunged $1800 late yesterday afternoon, rallied 1300 and is now down 2500! Gold is also down $10, and stocks have recovered from a later afternoon press. Rate futures are a bit lower, as the market continues to adjust to a less aggressive easing path following Tuesday’s comments from Bullard and Powell. July/Aug Fed Funds settled -30, still certain of a 25 bp cut in July, but shaving back the idea of 50. Aug/Oct settled -20. Jan’20 FF settled -6 at 9834.0, which is still 71 above FFN’19, (comfortably pricing 3 cuts by year end). The most negative one-year euro$ calendar spread is EDU9/EDU0 at -45, up 3.5 bps on the day. Implied vol oozed out of options. Attention is now focused on Trump/Xi.
–Q1 GDP revision expected +3.2. KC Fed expected 1.0…regional Fed surveys have been coming out on the weak side. 7-year auction today.
–Although TYU only -3 this morning, the long end trades somewhat tired and feels like a more significant retracement is coming, having essentially held 2%. Typically there is a rally out of the auctions, but likely to be muted today if it occurs at all. All the crazy ingredients of US/China, US/Iran, Brexit, N Korea, and Central Bank pronouncements have been put in the pot and are now at a slow simmer on the back burner.
