Rope-a-dope
April 16, 2021
–New all-time highs in stocks yesterday as retail sales blew past expectations, up 9.8%. China’s GDP was released at +18.3%. Good thing the Fed is keeping rates at zero and buying $120 billion in treasuries and MBS a month.
–Yields collapsed yesterday as the bond market has recently absorbed high inflation and high growth body blows like Ali’s rope-a-dope. At futures settle, 10y was down 10.2 bps at 1.53% and bonds down 11 bps at 2.21%. The curve flattened with nearly all one-year eurodollar calendars making new monthly lows. The highest one-yr calendar on the strip is EDM23/EDM24 which settled 64.5; it peaked at 78 at the end of March. White euro$ pack was unch’d, reds +2.875, greens +8.625, blues +12.875 and golds +14.375. Over the first five years of the strip, the lowest contract is, of course, the last gold, EDH’26, at a price of 9800.5, so nothing in the first five years has a yield over 2%. The low in that contract has been 9760; it has been a pretty spiffy short cover rally. USM settled at 159-00 at 3:00pm, but in the next couple of hours it sank close to 158, where it sits this morning. One trade of note, a new buyer of 20k 4EU 9750p for 8.0 (settled 8.25 ref 9817.0).
–2/10 treasury spread plunged 9.5 bps to 137.5, while 5/30 eased 4.5 to 141.7, the latter did not make a new recent low,, having held 139.
