Yields capped but vol firm
December 22, 2021
–Higher yields yesterday with the euro$ strip down 6.5 to 8.5 from reds to golds. Ten year yield ended at 1.484% up 6.7 bps. The concession drew buyers for the 20yr auction, which saw solid demand. Late day w/i yield was 1.95%; 2% seems to be a cap on the long end for now. Implied vol firmed on the move to higher yields, indicating increased fear of the downside.
–New high in the front three-month calendar EDH’22/EDM’22 at 24 bps. March/June/Sept fly settled 3.5 but I believe traded 4.5 yesterday. The front end of the market believes in Fed hikes as soon as the taper is over.
–Grains appear to want to make a run for new highs. March Corn is above $6 this morning, having been 5.20 in October. The contract high was just above $6.40 in May.
–Although Mayor Lightfoot has been completely ineffective at stopping muggings, smash and grab thefts, carjackings and murder, she now wants to make the city safe by requiring proof of vaccination to eat at restaurants. Covid has already decimated the dining industry. I was planning a CME dinner with friends in early Jan. I had been thinking Twin Anchors, or the Italian Village. Not now…it will be outside city limits.
