December Financials Roll

Tracker update and Yield Curves

Ok we wanted to get the settlements out today which is a perk for our subscriber base, which tracks the settlements of all the markets Magnelibra follows. In today’s addition we rolled the Financial futures contracts from December to March. In addition we have new 2Y and 5Y cash as part of the $330 Billion in auctions this week. Yes we know GDP for Q3 was great, but without this govt debt spending, well let’s just say its not the type of GDP input that we want to see. Anyway we also changed the BOB spread from 2:1 to 7:5, which is a big nut now as you have to buy 7 Bond futures and sell 5 ultras as the hedge, lets just say liquidity is a factor in that one, so will see how it affects things. We won’t roll the equities and currencies for another week or so and we didn’t touch the German fixed income yet either. Here are the settlements from Monday and Tuesday:

Thanks to Bill Ackman the US govt debt is now trending higher as he feels the FRB will have to cut sooner than later:

"I think the market expects sometime middle of next year. I think it's more likely as early as Q1 [first quarter]," the founder and CEO of Pershing Square Capital Management said in a just-published excerpt from coming episode of "The David Rubenstein Show: Peer-to-Peer Conversations." -Morningstar

The US yield curve reacted in kind by steepening dramatically with the short end exploding higher in price, dropping yields nearly 16bp in the US Govt 2Y:

The US Govt 2Y is now down to levels not seen in nearly 4.5 months:

As far as our Futures markets tracker, it has performed very well this month, we did reduce some of the exposure in the short end on this recent rally:

We will continue to bring our settles and trackers and will be back with the MEGA8s update later, equities haven’t really moved much lately. Perhaps we are seeing consolidation and positioning seems to have run into a standstill here. Consolidation is key and we like to see it before the next move is indicated, up or down. Right now the upside is still in play as the bears have all been wiped out. However, the inversion of the US yield curves in regards to the Fed Funds/10Y is a problem, but equities have been able to ignore it for now as it is now back to -106bp:

Ok that is it for now, we made this a free view so please share our work, or if you can please subscribe to support our work. It is imperative that we all do our part in helping as many as we can to understand the innerworkings of our financial system. It affects so many and we feel that we are at least doing our part to help you navigate and understand this system. Thank you to all that subscribe and thank you for sharing our work.

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