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US Treasuries Look Attractive on the Short Side
This morning's jobs report was solid but unspectacular, and it sets up some potential new trades.
Michael Sedacca    

This article was originally posted on the Buzz & Banter, where subscribers can follow over 30 professional traders as they share their ideas in real time. Want access to the Buzz plus unlimited market commentary? Click here to learn more about MVPRO+.

The immediate takeaway from this morning's May nonfarm payrolls report is... volatility crush. The various VIX (INDEXCBOE:VIX) futures products are down a few percentage points in the pre-market.

And to top it off, 10-day realized volatility in the S&P 500 (INDEXSP:.INX) is at just four! This implies that even if volatility picks up, it makes sense to be a seller of synthetic volatility products here.

Fundamentally, there's not a whole lot to say about the jobs report. There is continued strong growth from key sectors such as education, health, trade, and transport. There were no outrageous gains from leisure & hospitality or part-time workers. There was a small increase in the labor force and a continued increase in wages (not great, but not slowing), so we're still on the same trajectory that we saw before this report was released.

I do not think this bond movement thus far is indicative of any kind of bias on the results of NFP. I think this action is from delayed buy orders from real money that needs to be long everything now, which is bullish for all US risk assets. Yesterday, every component from the Dow Jones Utility Average (INDEXDJX:DJU) and KBW Bank Index (INDEXSP:BKX) closed positive. That is a very clear message from the market that every asset has further room to run.

That being said, I think bonds are setting up for a good short here to pick up about 15bps in the 10-year, but there are some outside technical concerns that I have to keep in mind:

  • The 10-year future (TYU4) is back to overbought from oversold on the hourly chart, after working off the overbought condition created by the futures roll last week.
  • The 10-year yield is kissing back against the prior trendline support.
  • 124-26/125-02 has been solid resistance for TYU4.


Click to enlarge

Traditional jobs-day rules say that you never trade the actual NFP day (which typically has a very tight trading range after the initial reaction) and the following Monday, which is typically an inside day as positions are squared and opinions begin to get expressed.

But since the euro was created in 1999, the historical resistance on the spread between 10-year US Treasuries and German bunds is 120bps, which is where we sit today. This might be the only thing that matters right now. Germany should continue to rally and that might just drag down the US by default.


Click to enlarge

There could be delayed buy orders from Europe, or real-money US buyers who are getting long the US since NFP was ho-hum. I don't think this is a short squeeze.

For now, I'll see how things progress in Europe for the next 24 hours as I consider a thematic short in the EURUSD.

Twitter: @MichaelSedacca

Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

US Treasuries Look Attractive on the Short Side
This morning's jobs report was solid but unspectacular, and it sets up some potential new trades.
Michael Sedacca    

This article was originally posted on the Buzz & Banter, where subscribers can follow over 30 professional traders as they share their ideas in real time. Want access to the Buzz plus unlimited market commentary? Click here to learn more about MVPRO+.

The immediate takeaway from this morning's May nonfarm payrolls report is... volatility crush. The various VIX (INDEXCBOE:VIX) futures products are down a few percentage points in the pre-market.

And to top it off, 10-day realized volatility in the S&P 500 (INDEXSP:.INX) is at just four! This implies that even if volatility picks up, it makes sense to be a seller of synthetic volatility products here.

Fundamentally, there's not a whole lot to say about the jobs report. There is continued strong growth from key sectors such as education, health, trade, and transport. There were no outrageous gains from leisure & hospitality or part-time workers. There was a small increase in the labor force and a continued increase in wages (not great, but not slowing), so we're still on the same trajectory that we saw before this report was released.

I do not think this bond movement thus far is indicative of any kind of bias on the results of NFP. I think this action is from delayed buy orders from real money that needs to be long everything now, which is bullish for all US risk assets. Yesterday, every component from the Dow Jones Utility Average (INDEXDJX:DJU) and KBW Bank Index (INDEXSP:BKX) closed positive. That is a very clear message from the market that every asset has further room to run.

That being said, I think bonds are setting up for a good short here to pick up about 15bps in the 10-year, but there are some outside technical concerns that I have to keep in mind:

  • The 10-year future (TYU4) is back to overbought from oversold on the hourly chart, after working off the overbought condition created by the futures roll last week.
  • The 10-year yield is kissing back against the prior trendline support.
  • 124-26/125-02 has been solid resistance for TYU4.


Click to enlarge

Traditional jobs-day rules say that you never trade the actual NFP day (which typically has a very tight trading range after the initial reaction) and the following Monday, which is typically an inside day as positions are squared and opinions begin to get expressed.

But since the euro was created in 1999, the historical resistance on the spread between 10-year US Treasuries and German bunds is 120bps, which is where we sit today. This might be the only thing that matters right now. Germany should continue to rally and that might just drag down the US by default.


Click to enlarge

There could be delayed buy orders from Europe, or real-money US buyers who are getting long the US since NFP was ho-hum. I don't think this is a short squeeze.

For now, I'll see how things progress in Europe for the next 24 hours as I consider a thematic short in the EURUSD.

Twitter: @MichaelSedacca

Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

US Treasuries Look Attractive on the Short Side
This morning's jobs report was solid but unspectacular, and it sets up some potential new trades.
Michael Sedacca    

This article was originally posted on the Buzz & Banter, where subscribers can follow over 30 professional traders as they share their ideas in real time. Want access to the Buzz plus unlimited market commentary? Click here to learn more about MVPRO+.

The immediate takeaway from this morning's May nonfarm payrolls report is... volatility crush. The various VIX (INDEXCBOE:VIX) futures products are down a few percentage points in the pre-market.

And to top it off, 10-day realized volatility in the S&P 500 (INDEXSP:.INX) is at just four! This implies that even if volatility picks up, it makes sense to be a seller of synthetic volatility products here.

Fundamentally, there's not a whole lot to say about the jobs report. There is continued strong growth from key sectors such as education, health, trade, and transport. There were no outrageous gains from leisure & hospitality or part-time workers. There was a small increase in the labor force and a continued increase in wages (not great, but not slowing), so we're still on the same trajectory that we saw before this report was released.

I do not think this bond movement thus far is indicative of any kind of bias on the results of NFP. I think this action is from delayed buy orders from real money that needs to be long everything now, which is bullish for all US risk assets. Yesterday, every component from the Dow Jones Utility Average (INDEXDJX:DJU) and KBW Bank Index (INDEXSP:BKX) closed positive. That is a very clear message from the market that every asset has further room to run.

That being said, I think bonds are setting up for a good short here to pick up about 15bps in the 10-year, but there are some outside technical concerns that I have to keep in mind:

  • The 10-year future (TYU4) is back to overbought from oversold on the hourly chart, after working off the overbought condition created by the futures roll last week.
  • The 10-year yield is kissing back against the prior trendline support.
  • 124-26/125-02 has been solid resistance for TYU4.


Click to enlarge

Traditional jobs-day rules say that you never trade the actual NFP day (which typically has a very tight trading range after the initial reaction) and the following Monday, which is typically an inside day as positions are squared and opinions begin to get expressed.

But since the euro was created in 1999, the historical resistance on the spread between 10-year US Treasuries and German bunds is 120bps, which is where we sit today. This might be the only thing that matters right now. Germany should continue to rally and that might just drag down the US by default.


Click to enlarge

There could be delayed buy orders from Europe, or real-money US buyers who are getting long the US since NFP was ho-hum. I don't think this is a short squeeze.

For now, I'll see how things progress in Europe for the next 24 hours as I consider a thematic short in the EURUSD.

Twitter: @MichaelSedacca

Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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