The big event of this day, may I so boldly say maybe this year, was an announcement by Pfizer at 6:43 AM ET. Bloomberg ran the following bullets:
*PFIZER VACCINE PREVENTS 90% OF COVID INFECTIONS IN LARGE STUDY
*PFIZER-BIONTECH PHASE 3 TRIAL SHOWS NO SERIOUS SAFETY ISSUES
*PFIZER-BIONTECH VACCINE 2-MONTH SAFETY DATA DUE IN ABOUT A WEEK.
There was a follow-up piece from Bloomberg that said the trial had been conducted on “tens of thousands” of individuals.
US 30s gapped 14 bps higher in yield (1.58% to 1.72%), 10s went from 0.81% to 0.91%, while eminis jumped 80 handles (3550 to 3630), with a similar jump in DOW. NASDAQ jumped but is clearly underperforming since then. Other risk assets performed likewise, with crude jumping a quick $2 (5.5%). Gold dropped a quick and ugly $50 (2.6%), while the greenback dropped a swift .3% before bouncing back a bit.
Treasuries had opened softer in Asia on a better bid to equities and risk as it looks like we may actually get through the US election cycle without a prolonged legal battle. Europe saw better buying of US rate products, led by central bank buying of ultras and spread product, that helped take Treasuries positive even as risk continued its steady bid. Market expects the makeup of the new Congress favorable to modest stimulus. Fixed income held a bid throughout the European morning, with European real money buying of US 30s, but better effort by RV accounts to set up for this week’s supply that kicks off today.
Volumes have exploded in the last two hours; we had decent volume before the Pfizer announcement, but you have quadrupled volumes since. Curve is steepening aggressively. Vol was bid initially (knee jerk on the realized move), but there has been aggressive put selling in Treasuries that has crushed vol since, including a block sale at 7:36 AM ET of 50K TYZ 137.5 puts at 10/64, exchanging 35% delta (16,500 futures) at 137-30 in TYZ. There has been $1.5MM of DV01 in the 7y sector dumped on the market via blocks at 7:51 and 7:53 AM ET (12,892 sold at 137-25+ and then 3485 sold at 137-23). You get the idea.
No data or Fed speakers today, not that such would likely matter. There is a $54BN 3y note auction from Treasury to kick off the quarterly refunding this week, with 10y tomorrow and then the 30y on Thursday after we take a break for Veterans Day on Wednesday. Certainly will be a nice concession for the paper now, have to see if that matters. Couple levels to watch using futures in TYZ: 138-07+ and 138-14+ for resistance right now, with the latter being single prints from the break this morning, while support comes in at 137-16 (0.95% equivalent in 10y cash) and 137-04 (1% equivalent in cash). In US classic futures, the resistance levels after this break come in at 171-25 and 172-27 (the latter being the single prints from the AM break), while support is at 170-00 (1.759%) but through there you really have to watch for a bigger break to 2.06% in cash which would be all the way down at 163-25! It will be fluid today, that’s for sure!
Be well and be careful,