US: Late Corporate Credit Update: Credit Risk Continues To Inch Lower
Investment-grade corporate credit risk holds near six week lows as bull cycle for stocks continue. Currently, SPX eminis trade +55.75 (1.37%) at 4129; DJIA +276.07 (0.85%) at 32804.9; Nasdaq +210.5 (1.7%) at 12372.85.
- Investment grade risk measured by Markit's CDXIG5 index -0.367 to 80.191; CDXHY5 high yield index at 101.181 (+0.076).
- Outperforming credit sectors (tighter or least wide): Financials Sr (-3.8) and subordinated (-3.6) followed by Energy (-2.3) and Consumer Staples (-2.1).
- Lagging sectors (wider or least narrow): Technology, Communications and Utilities averaging -1.6.
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US: Late Corporate Credit Update: Heating Up Again
Investment-grade corporate credit risk holding mildly high in late FI trade, upper half of narrow range as stocks recede amid thin participation: SPX eminis trading -9.25 (-0.24%) at 3816.75; DJIA +65.12 (0.21%) at 31010.79; Nasdaq -39 (-0.3%) at 11142.58.
- Investment grade risk measured by Markit's CDXIG5 index at 100.174 (+0.854); CDXHY5 high yield index at 97.132 (-0.418).
- Outperforming credit sectors (tighter or least wide): Health Care and Industrials sectors both (+0.9) followed by Technology and Utilities (+1.1).
- Lagging sectors (wider or least narrow): Materials (+3.1), Consumer Discretionary and subordinated Financials both +2.2.
CANADA: Skittish USDCAD With Important Data Tomorrow
- USDCAD has seen a volatile session to ultimately sit +0.1% at 1.2888, moving higher with Powell's participation on the ECB panel, with CAD again outperforming high beta majors.
- Widening front-end Can-US yield differentials have helped keep some downward pressure on USDCAD today but a REER almost completely in line with its historical average and recently trimmed net spec positions gives the pair room to run in either direction.
- Technicals have pointed to a short-term bullish reversal and initial resistance is close at 1.2917 (Jun 27 high), clearance of which could open a bull trigger at 1.3017 (Jun 23 high). As noted earlier, CIBC look for a sustained push above 1.30.
- Going against that in the very short-term is sizeable option expiry for tomorrow’s cut-off with 1.525B at 1.2750 although that could be too far away to offer much traction.
- Both Canadian GDP and US personal/incomes and core PCE inflation will be important drivers in the near-term.
US TSYS: Eurodollar/SOFR/Tsy Option Roundup
Midweek FI option volume continued to thin in the lead-up to the extended 4th of July holiday weekend (early 1300ET close Friday, Monday closed). Carry-over interest in downside puts continued (with one notable exception in SOFR options) fading the rally in underlying futures on the day.
- Salient Eurodollar trade included buy of over 50,000 Dec 96.00/96.50 put spds at 26.0, while paper paid 12.5 for +5,000 short Aug 95.87/96.37 put spds around midday.
- Treasury options included carry-over buy of 8,500 TYQ 113/114 put spds, 4 vs 117-11 adding to +10,000 bought Tuesday, while Block buy of 7,500 USU2 137 puts, 303 vs. 136-24/0.50%.
- SOFR options upside insurance trade had paper buy 10,000 SFRZ2 97.50/97.75 call spds, 3.0 vs. 96.65/0.05%.
