Powell vows to do what he can as GDP expected -35%

July 30, 2020

–Powell vowed continued support for the economy at yesterday’s FOMC.  Yields at the front end pressed lower with twos down to 12.3 bps, a decline of 1.2.  Tens were unch’d at 57.7 and thirties rose 2.3 to 1.244%, providing a small bounce in the curve.  Notable buying in EDZ0 as swap lines to central banks were extended…appears to be short covering as open interest fell in the contract.  EDZ0 closed +2 at 9972.5 (strongest contract on the strip), while FFF1/EDZ0 spread closed at a new low of 24.  (Proxy libor/ois).  

–New high in ten-year note to inflation-indexed yield breakeven spread at 153.4 bps, as the tip yield hit a new all-time low of negative 95.7 bps.  DXY made a new low yesterday as well with EUR popping above 1.18 for the first time since Q3 2018.  Current 1.1747.

–Today’s news includes Q2 GDP which is expected down around 35%.  Whether anticipating the shock of the actual number or concerned about this afternoon’s earnings, stock index futures have reversed yesterday’s gains.  After the close FB, Alphabet, AMZN, AAPL all report.  Newmont this morning.  Of course, lack of an agreement on extending the $600/week will also cut oxygen from stocks, and that deal doesn’t seem any closer today.  

Posted on July 30, 2020 at 5:43 am by alexmanzara · Permalink
In: Eurodollar Options

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