We kick off the week with yet another horribly boring evening in general for the markets, as activity remains muted by Brexit, FOMC, Japanese fiscal year end, and a lot of noise around Trump/Li negotiations potentially being delayed several more weeks, if not months. As of 8:20 AM ET, Treasuries were 1.25-1.75 bps higher in yield, US equity futures were largely flat, and volume remained anemic, with only 250K contracts having trade in TY futures.
There was short covering of expiring TYJ 122 puts (30K bought for 1/64, expiring this Friday) shortly after the Asian open that helped weigh on Treasuries early, given the lack of any flow otherwise. Other than that, there was small (emphasis on small) Japanese real money selling of US 5s and 7s mid-session in Asia for Japanese fiscal year end. There was minor buying of JGB 10y sector against selling of US 10s, but nothing to leave an impression. Asian equities closed better, led by a 2.5% gain for Chinese bourses, while rest of Asia was up slightly less than 1%.
Europe flipped to better buying in general risk off highlighted by better European RV buying of 5y sector and European real money buying of 7s. There was nothing notable about the trade in Europe as most of the London morning was spent in a tight range, with focus on speculation of a delay to the MV3 vote. There were a couple large block trades in options: buying of TYJ 123 calls and selling of FVJ 114.75 puts. In both cases, these look to be new positions into expiration as the volumes on each exceeded open interest.
The arrival of NY brought out some selling in the long end, with deal-related sales in 30y along with paying in belly, just as a large bobl block sale went through to help the belly drag European and US curves lower. Today’s only data will be NAHB at 10 AM ET and then we’ll go back to waiting….
Hard to get excited about trading ANYTHING right now. So for choice, let’s call the range in TYM at 123-01 to 122-21+. At this point, if you are going to go satisfy that downside objective, you should not get back above 122-28+. If you get through 122-21+ (like if Japanese accounts come in to sell like they did mid-day in the US on last Weds and Thurs), maybe we can break all the way to 122-14, which will get us back to that 2.65% level everyone is watching so intently. No good conditional ideas here, barely a good idea at all except to cautiously play from the short side for today but be flat by day’s end. Time to work on some college basketball pools anyhow….
Have a great Monday,