Tuesday, March 24, 2015

Modest Volume, Modest Gains, New Longs

On very light volume (TY 64% and ED 56% of 1yr averages), open interest rose across the curve indicating that many of those who traded yesterday did so with an intention of creating new positions.  Nearly 8% of trade in TY and 9% of volume in Eurodollars resulted in new positions created. 

The Eurodollar futures yield curve flattened slightly throughout the first 4 years while the Treasury 5-30 yield curve steepened by 6 bps to a new 2 week high of 112. 

The technical trend remains constructive with little signs of overbought conditions prevailing.  Recent gains in open interest may profit the bullish contingency as further gains may prompt shorts to exit positions. 

Inflation data (CPI) marks the card today along with New Home Sales.  Economic surprises have been almost exclusively toward weakness and inflation data having had the odd up-tic in wages in January has failed to spark the imagination of hawks.

San Fran Fed Williams softens tone about need for timing of rate rise from the need for ‘serious discussion’ to simply ‘discussion’ toward mid-year.  Vice Chair Stanley Fischer said rising rates “likely will be warranted before the end of the year”.        

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