Eurodollar futures are lower and the Eurodollar futures yield curve is steeper throughout the first two years following slightly lower than expected Q2 GDP report that included a positive revision to Q1 and the previously noted jump in PCE.
In early trade today, Treasuries show short end weakness and the long end higher with a stronger dollar and lower commodities prices. Light volume attended trade yesterday and open interest declined in Fed Funds, Eurodollars and Ultras (-4K, -28K, -5K) while increasing in FV, TY and US (+18K, +27k, +6k).
Treasuries and Eurodollars are higher in overnight trade, in sympathy with the lower than expected factory orders report out of Germany and falling yields there. U.S. domestic rate movement is quite modest thus far, recovering little of the two session decline following Friday’s sharp post-employment report advance.
Following the January better-than-expected employment report there was very little recovery during the first few sessions and trade was generally toward the lower end of that Feb. 6 session until last Friday when an additional better than expected payroll report drove prices lower again.
Open interest fell as Eurodollar and Treasury prices advanced yesterday, indicating that as market participants take in both Yellen’s testimony and the spate of less than stellar economic reports, bearish minded traders are exiting positions.
On initial review, there is little to like in the Housing Starts and Permits, though the revision of last MoM was significant -1.9% to 0.0. Otherwise, the PPI data was weaker than expected across categories.