markets trade directionless on no volume….it gets tougher (Tuesday)

This is getting old….markets continue to trade seemingly directionless on no volume even as most of world returns for first session after the Passover/Easter holidays. Now we enter earning season, JPM and WFC just reported and market says the reports were good. It’s way above my pay grade, so I’ll just report and note the respective stocks traded up about over 1.5% in pre-open after each release. As for the market, we had a minor risk on trade (better China data) during the Asian session but risk off (Eurogroup issues) during the European session. As of 8:15 AM ET, Treasuries are flat to 1 bps higher in yield as markets trades steeper, while US equity index futures trade 1.5% to 2% higher ahead of the US open.

Flows were moribund in USD products throughout the night. In Asia, there was some small interest in USD 10s30s flatteners on the swap curve, a small amount of Asian bank receiving in USD 5y sector, but better paying in USD 10y and 30y swaps by Japanese real money. Into the European open there was the usual central bank buying of US 7s and mortgages, but nothing that would really hit the radar in a normal day. Futures were left in the trading dust, only seeing some small Japanese asset manager selling of TY contracts, although better RV account buying of TY against RX (bund) contracts mid-morning in Europe. There was hedge fund buying of FV contracts and Gilt 10y futures by macro funds, but again nothing very thematic.

As for the Asian session, China’s March trade figures beat expectations on “less than anticipated” drops in exports AND imports, which helped engender a risk on trade throughout the Asian session. Asian equities traded firmer, bucking the trend of the US market on Monday, with NIKKEI leading the way (+3.1%), while rest of Asia was largely up between 1.5% to 3%, except for Hang Seng which only gained .6%. Japan’s liquidity enhancement operation was disappointing, leading to a back up in yields; however, the RBNZ seemingly has the program running smoothly as they only received NZD 161MM of offers (up to 200MM to buy), with yields on the 4/37 issue dropping a quick 9 bps. Go figure. By session’s end, Kiwi 10s were 3.5 bps lower in yield, Aussie 10s were 2 bps higher in yield on a very nondescript session that just followed the Treasury lead from Monday, and JGB yields were flat to 2 bps higher in a steepener.

The European session was simply about the inability of the Eurogroup to arrive a compromise on how to fund the crisis and how to administer the funds. Some things never change. There was no significant data or any worthwhile comments during the session. Seems almost like a holiday hangover there. A T7 trading system issue at Eurex halted futures trading for a while on the exchange, only exacerbating the liquidity issue. Peripherals have taken a small beat down, with Italy of course leading the way after Conte comments only widened the gap in thinking about bailing out Italy for the European Union. Bunds saw a small safe-haven bid early in the session as peripherals were marked wider. European equity indices are all trading marginally higher in the early afternoon.

Today’s calendar in the US includes Import and Export prices at 8:30 AM ET, with Bullard (11:35 AM ET), Evans (12:30 PM ET), and Bostic (3 PM ET) all scheduled to speak. Today’s buyback schedule commences at the usual 9:50 AM ET and runs until 12:20, with four operations for a total of $35BN across the Treasury curve. Of course, the big tape watching will be for corporate supply after a very active Monday that saw 7 borrowers tap the market for $19.8BN in funding, led by good demand for issues from Exxon and GE.

Okay, we aren’t going anywhere today again, as we have taken to being all-consumed by small moves. Cleaning up files, answering emails, and chatting about “the next move” are getting as old as sitting at home on weekends. Oh well, this too shall pass. Still don’t think it’s a bad idea to add some gamma here, because somebody will invariably screw something up globally, but understand if one wanted to keep the cash in the bank for the moment. As for choice today in TYM, let’s call the range 138-14+ to 138-03 (yes, that’s basically the same range as yesterday, but everything keeps lining up that way), with an overnight range of 138-07+ to 137-27. Support below 138-03 comes in at 137-28, 137-22/22+, 137-16, 137-06+, 136-25; resistance comes in at 138-08, the aforementioned 138-14+/15+, 138-19, 138-24+, 138-31/139-00.

Have a good Tuesday,