Sept 2. Bonds shorts are firmly in control
–From BBG: “Stocks climbed around the world and copper rallied as manufacturing in China and Europe expanded and prospects of an imminent strike on Syria faded. The yen weakened, bonds declined and crude oil fell for a third day.” PMI data from the EU better than expected. Dollar/yen has been moving sideways since April but now appears to favor breaking out above 100 (current 9925) as Fukushima continues to worsen.
–Obama’s decision to seek congressional approval for a Syrian attack has alleviated selling pressure on stocks and caused bonds to erase all gains from last week. Improving EU data also puts US bonds on the defensive going into nonfarm payrolls on Friday. (New two year high in UK gilt yield).
–New monthly low on Friday in 5/30 at 207 (and a couple lower yet this morning). 2/10 at 237 is around the midpoint of the recent range. This morning EDZ6 trades 9715, so the huge buyer of blue dec and blue nov put condors with top strike of 9712.5 (25 wide) is close to being in the money. Shorts maintain control of the market with the Fed poised to cede further ground as the FOMC tapering decision nears (FOMC Sept 18). Indonesian rupiah near new lows underscores general weakness in EM due to the surge in real US rates and also pressures treasuries as UST reserves are sold for currency intervention.
–Shortened session due to US holiday. Noon close (CST) for interest rates.
