Tax Day
–It’s the usual stuff this Monday morning. Two dollar swings in the price of oil on failed Doha talks, ESM falling 16 handles before fighting back, earthquakes rattling Japan and Equador, heightening concerns that CA could be next, Japanese stocks -3.4%, JPY again briefly trading below 108, Rousseff losing an impeachment vote in Brazil, Saudis threatening to dump treasuries if an inquiry ties it to 9/11, Russian aircraft buzzing US warships and planes, China landing aircraft on one of its South Sea man-made islands. Oh, and it’s tax day. No wonder the ten year note is up 3/32’s.
–David Rosenberg noted that Yellen used the word uncertainty ten times in her March 29 speech, and events noted above certainly underscore that idea. Along with brexit, and China lurching back and forth between stimulus and a hard landing. One thing that the market has become pretty certain of: no more than one Fed hike this year. Eurodollar calendar spreads continue to compress. EDZ16/EDH17 closed at just 4 bps on Friday! There was an exit seller of 20k EDZ16/EDZ17 Friday at 20.5, near the low end of the range. August/Oct FF spread (which isolates the Sept FOMC for hiking odds) closed at 3.0. So a bit more than 10% odds of a hike in Sept.
–While it might be a risk-off world, US equities are now seen by many as a safe haven. Central bankers routinely bring up the idea of helicopter money, assuring us that it won’t be needed, it’s simply an academic brain teaser that they think about in their free time. Do we continue to conclude that the Central Bankers have our backs?
