Good Afternoon East Coasters. Happy Lunch Hour Westsiders.
Stocks are still ticking higher, and higher, and higher, and higher...currently at the highs of the day. The S&P is now trading over 1000...50% higher from the 666 March low...go figure. Leading the S&P higher today are oil and metal stocks as NYMEX crude is trading over $71 /barrel...btw it was trading in the $68 handle on Friday. BIG JUMP! Sponsorship provided by a weaker US dollar..the DXY is currently trading at $77.62...after reaching $79 on Friday.
Ahhh...then there is ol faithful....the yield curve! For fixed income watchers the story has been VOLATILITY then status quo, then VOLATILITY, then status quo. Its been a wild ride and several educational opportunities have arisen...hopefully you see the market a little differently than you ever had in the past....just remember: IT'S A TRADER'S WORLD, WE'RE JUST LIVING IN IT.
So youd expect all hell to be breaking loose in TSYs given the dollar weakness and optimism in equities, however we are just kinda hanging out at the top side of the yield range. Following the morning washout of " flattener" positions...STATUS QUO has been returned in the rates market. The 10 yr TSY note is "sittin sideways" (haha name that rapper) at a key support level. It's been BANG BANG BANG in a 2 bps range all afternoon...yeh a reeeeeeal barnburner.
The previously discussed support level does have technical price relevance. Trader's are working off of the SEPT 10yr TSY contract's July 21 price high...currently holding steady at the 23% retracement. Remember the market either accepts or doesnt accept prices...well for now, given all economic and financial assumptions, the fixed income market is accepting of 116-03 which works out to about 3.65% in the cash market (see above).
And then there's our current coupon title belt holder...the FN 4.5 (epic music). Holding near 100-00. Parnertia is strong!
Looking ahead...
MUHUHAHAHAHHA!!!!
That's the laugh of a giddy day trader. While the Employment report on Friday will keep the rates market from venturing too far from "status quo" .... strength in stocks and weakness in the dollar will create some added volatility as market participants turn towards the options market to protect their rear from added risk. Until Friday its the "WAIT AND SEE" MODE RANGE TRADE !!! Yaaah FICC revenues!!!
2s vs. 5s: 148bps
2s vs. 10s: 245bps
5s vs. 10s: 97bps
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