Sanctimonious preaching

July 1, 2021

–Markit Mfg PMI for the euro zone hit a record 63.4.  Today in the US, ISM Mfg is expected 61.0 from 61.2 last.  Jobless Claims are expected 388k.  The attached chart shows ISM Mfg Prices pinned towards historic highs at 88.  Going into tomorrow’s payroll report, ADP was released yesterday at 692k, but the previous number was revised lower so it was about a wash relative to expectations.  Corn and beans soared on the crop report, with Dec Corn +40 cents and trading about 6 higher this morning at 595.  In addition, CLQ1 made a new high of 74.55 bbl this morning.  

–If quarter end was marked exactly at 4:00pm EST then the last gasp of bond buying occurred just prior to that with a print in USU of 160-28.  From there it immediately sold off and is 160-00 this morning.  Price action suggests to me that the buying fever has broken; I would be inclined to place a short with a stop just above yesterday’s highs and an initial target around the mid-June low of 157-12.  Of course, tomorrow’s data could prove volatile, but might not matter all that much given the technical set up.  The ten year yield was down 3.4 at futures settle at 1.444%, but is now again above 1.47.  A popular trade in eurodollars, EDZ’22 to EDZ’24 two-year calendar, settled at 102.5, but immediately popped back up to 105 late in the session yesterday.  New recent low in red/gold euro$ pack spread at 120.375 as reds (2nd year) closed +1 and golds (5th year) were +4.0.  

–There was a new buyer of 10k TYU 135/136 call spread yesterday, which settled 5/64 vs TYU 132-16.  It got a bit of BBG press as a trade targeting 1% in tens.  My guess is that it’s a protection trade, and the buyer will be delighted to lose those 5/64’s and see the market go the other way, as a sacrifice to the bond gods.

–China’s leader Xi decried “sanctimonious preaching” alluding to the US in his speech marking the 100 year anniversary of the China Communist Party.  Of course, I can’t side with Xi on much of anything, but on the topic of sanctimonious preaching he’s on to something, because it’s out of hand in the news media and across special interest groups.  On the other hand, his uncompromising vow to re-incorporate Taiwan is unsettling, if not unexpected.   

Posted on July 1, 2021 at 5:34 am by alexmanzara · Permalink
In: Eurodollar Options

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