Más vale pájaro en mano que cien volando.

 

(Bloomberg) — An overnight rally that began in Asian equities failed to hold ahead of a spate of key earnings reports this week.

Investors beginning to view China’s draft plan for sweeping personal tax cuts, together with a recent rise in the tax threshold as an act of desperation for a flagging economy rather than a big positive for growth. China’s growth slowed further than expected in 3Q even as trade appears yet to have a decided impact.

China Issues Draft Plan to Further Cut Household Tax Burden

by Bloomberg News

China released a detailed draft plan for personal income tax cuts on Saturday, as the nation’s economic growth slowed to the weakest pace since the aftermath of the global financial crisis in 2009.

The dollar rose to the highest level in two months while GBP dropped the most in a month amid Tory infighting.

Treasuries traded sideways amid a week of large government issuance including four bill auctions and a combined $108 billion in 2-, 5- and 7-year notes.

Treasuries held to a narrow U.S. trading range, with 10-year yields plying less than 0.5bp since 11am ET; lack of price catalyst after the close in London was met with subdued futures volumes.

In the front end, early options activity was met with plays that faded last week’s aggressive selloff, targeting a Fed IOER tweak at December FOMC.
Yields were mixed, but within a basis point of Friday’s close shortly after cash settlement; 30-year yields were marginally cheaper, steepening 5s30s by 0.4bp on the day. 

Late TY block (6,867 at 118-01+) had little market impact.

Early flows included real money selling in front end of the curve and in 30s.

Futures volumes in 10-year note were around 70% of 10-day avg up to 3pm ET;

…early activity included 8,500 FVZ8 block trade, which stemmed early gains.
Across the front end, sporadic activity included 50k screen lifts in EDZ8 and EDH9 as last week’s selloff faded; white pack outperformed with EDZ8 higher by 2.5bp

In eurodollar options, flows included further buying of Morgan Stanley-recommended trade of long EDZ8 97.25/97.375/97.50 call fly, targeting potential IOER cut at December FOMC.

Elsewhere, aggressive selling of EDZ8 97.25/97.125 1×2 put spreads also seen, which appeared consistent with close-out of trade initiated last week IG issuance slate was quiet with just three names led by $2.15b Constellation Brands; total of $15b-$20b in new supply is expected for the week

Screen Shot 2018-10-22 at 3.38.09 PM

Precious metals fell even as risks remain from the continuing U.S.-China trade showdown and tension surrounding the killing of a Saudi journalist to Italian budget fears.


Key Headlines:

  • KDDI to raise up to 90B yen in bond sales: Nikkei
  • Argentina sets Presidential election for Oct. 27, 2019: Nacion
  • Bundesbank says German economic growth may have stalled in 3Q
  • September Chicago Fed national index 0.17 vs est. 0.22

 



-R.W.N II, yours in 322.

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