Winter solstice
December 21, 2021
–Shortest day in the Northern hemisphere.
–Curve steepened yesterday as the bond contract reversed early strength and had an outside day, closing near the lows. The two year yield fell 1.2 to 62.8 bps while thirties rose 3 to 1.846%. Stocks reacted negatively to omicron concerns and Manchin’s refusal to back BBB, but had an end of day bounce which has continued this morning. Twenty-year auction (re-opening) today of $20 billion. I have attached a chart, showing that the current yield is right about in the middle of the year’s range; the w/i was 189.5/189 at the time of futures settle. Without continued Fed buying, against a backdrop of high inflation, I’m not quite sure where sponsorship comes from.
–Near one-year eurodollar calendar spreads have been grinding to new recent lows. The peak is still EDH2/EDH3 at 79.5, but pre-FOMC the high was 96. EDM2/EDM3 is 72.5, also a new recent low. Huge buyer of 100k 0EH 9862.5/9850 p spread yesterday, paying 3.5 covered various futures prices. Settled 3.25 vs EDH3 9885.0. Euro$ curve: Whites +1.375, reds+2.125, greens +0.625, blues -1.25 and golds -3.25.
–Large earthquake off the Northern California coast yesterday. More seismic activity than usual off the northwest coast.
https://earthquake.usgs.gov/earthquakes/map/?extent=-3.16246,-186.32813&extent=70.49557,8.4375–Biden address today, though the major theme is NOT more shutdowns, according to a late news blurb.
