while you were sleeping….yeah, you missed all the fun!

So the most violent market move of this night occurred after everyone in the US assumed we were done for the evening and tried to get a couple hours of sleep. What you missed was a very determined and agitated speech (press conference as he described it) by President Trump. Five minutes before Trump addressed supporters at 2:20 AM ET, word leaked out that he planned to declare victory and would demand that the vote count be stopped immediately. E-minis dropped 20 handles, 30y yields fell a quick 4 bps while 10s fell 2; when Trump spoke and confirmed that he would seek legal remedy from the Supreme Court (not sure how that would work), minis dropped another 30 handles while 30s dropped another 2 bps and the dollar rocketed higher.

We have since clawed our way back as Trump’s comments were quickly denounced on all sides and walked back by aides to the President. Amazing strength throughout the night by NASDAQ is showing itself again this morning, further helping risk. As of 4:30 AM ET, eminis are just off their highs, up 44, with NASDAQ futures up 350 and DOW futures up 140. Bonds yield 1.58, 7 bps lower than their 3 PM marks, 10 bps lower than 5 PM levels, with the curve bull flattening.

30y traded between 1.75 and 1.51% thus far today, a nice 24 bps range on the session while 10y traded an 18 bps range (.7625 to .9435), with 5s30s tagging 133 bps at the beginning of the session when Biden was doing well early before flattening 16.5 bps to a session tight of 117.6 bps. Volumes were very good in brisk risk on trade early in the Asian session; as Trump started to rally, so did Treasuries and the greenback. AS of 5 AM ET, we have traded an impressive 1.45MM TY futures thus far today, some 7 times recent average. It was not a good tactical positioning market but a good market for gamma hedgers. Have not heard much in the way of flows away from Treasury futures, as many buy side accounts hung to the sidelines. Macro accounts and hedge funds were active in options, adding around January expiries (Dec 24 expiry, 50 days) in Treasury futures, while selling of late TYZ expiries (Nov 20 expiry, 16 days). There was some unwinding of spec trades, largest of which was sale of some 40K blue nov (3EX3) 93/95 put spreads at 3 bps and then 2, of which 8880 were blocked just around 11 PM ET. Some selling of TYZ 137.5 straddles went through at 1-06/64 (TYZ trading 138-17+ at the time), now marked at 63/64. Block curve trade went through in Treasury futures just before Europe arrived, with client adding $250K of DV01 in 5s7s on the Treasury curve (+2300 TYZ for 138-22+, -3800 FVZ at 125-23+, 12:18 AM ET).

Away from the US, BoJ’s Kuroda spoke to business group and said BoJ was ready and “won’t hesitate” to ease further as needed, viewing the risks as “tilted” toward further downside for the economy and inflation expectations. JGB 10y auction went very well on the heels of these comments, very small tail and very aggressive bidding. Bunds are rallying in sympathy with Treasuries, although several analysts are calling for widening of bund/10s spread. Gilts finding support from the political stalemate in the US, as they are next in line, while snags on BREXIT negotiations (this time, fishing agreements) and soft UK CIPS PMI added to the bid for UK rates, ahead of tomorrow BoE meeting.

We have a busy day in the US, with ADP (8:15 AM ET), trade data (8:30), and ISM Services Index (10 AM). We will also Treasury’s Quarterly Refunding Announcement for next week’s new 3s, 10s, and 30s. And the FOMC begins the first day of their two-day meeting. But alas, all that will take a back seat to the theater known as the 2020 US Presidential Election. This should be a dandy, and it could last hours or days. Before the first results were announced some 9.5 hours ago, Biden basically had a 70% betting chance of winning; at the height of his campaign’s move overnight, Trump was listed with a 69% chance of winning; when news broke that early votes may have pushed Biden into the lead in Wisconsin (still not confirmed), the challenger’s betting chance of winning was back above 60%. I am sure we are not done with this.

Either way, it won’t be boring…good morning and good luck out there!