Morning 12-22

Bitcoin Commentary Via pymts.com
Bitcoin went up — all the way up, making it over the $20K per unit mark. Now bitcoin is coming down, as yesterday saw the world’s best-known cryptocurrency plummet 25 percent to less than $13,000.
Bitcoin was not alone in the hurt locker — digital currency had a rough day nearly across the board yesterday. At the day’s beginning, there were 31 digital currencies with a market cap of $1 billion or better — by day’s end, 29 were reporting losses. Ether, the second-biggest digital currency by market value, dropped 26 percent over the past 24 hours; litecoin was down 32 percent.
Volatility is not new to bitcoin, which started December at $10,000 a unit — but the big drop-off seems to have caught the ecosystem off guard. All in all, Bitcoin is net down 30 percent over the last four days — which marks the 5th time Bitcoin has found itself in a price plunge this year.
In the prior four instances, it took Bitcoin an average of 38 days to hit a new high, according to Charlie Bilello, director of research at Pension Partners, an investment-advisory firm in New York.

• Congress passes a stopgap spending measure until mid-January kicking the can down the road one more time. Mid-January the spending fight/Debt ceiling battle will pick up in Ernest but for Now Politics will have no impact on these holiday markets as Congress has “left the building.”
A few comments about different assets. Copper has been higher for 12 consecutive days, Soybeans closing lower for 12 consecutive days.US 10 year yields appear to have found resistance at 2.5% . The probability of ECB hiking rates 1 year from now stands at 44% 1 week ago it was 25%.Bund yields are higher by 14 Bps this week but yet are only at levels last seen in November.2 year schatz yields in Germany touched highest levels since July but still are Negative .64%. Crazy. Natural Gas is down 20% from December 1st highs and trading near lowest levels of the year indicating that supplies are ample for upcoming winter demand. Lumber, YTD is +40%
A handful of Economic releases today highlighted by the Feds favored Inflation gauge, PCE. This should not move the needle but any upward surprise would be just that a surprise.
Merry Christmas, Happy Holidays and Happy New Year to all.

 

morning 12-21

BOJ left policy unchanged as expected.

UK PM May’s deputy resigned overnight due to a personal scandal

A handful of Companies have either announced an Increase in minimum wages, capital investment or handing out a special onetime bonus. Companies Include AT&T, Wells Fargo, Fifth third bank and Boeing due to The passing of the tax bill. Spoos higher go figure. European stocks mixed Long end bonds higher, bunds and buxl as well as the aggressive selling last 3 days has subsided. The dollar has caught a bid as the New York session get underway and now sits higher by about 20 ticks. Euro and yen little changed. Gold, Oil and Copper sideways as Holiday themed trade in full swing.

Congress most likely to pass a bare bones stop gap-funding bill to keep government running until late January where they then Hope to pass something permanent. OPEC said they are working on an Exit strategy this caused some weakness in Brent and Crude oil. Natural gas not worried too much about upcoming cold blast just scored a new contract low.

Bitcoin little changed this morning.

Second tier economic releases today

Selling continues in Bonds

Day 3 of the long end sell off as March bonds trade below support area adding a bit of fuel to move.Currently bonds down 1 handle  and ultras down 1.15 handles as buyers appear reluctant to be aggressive on the bid and why should they? as longs are stuck and maybe forced sellers due to margin calls.A very  impressive sell off continues

30s

Market update

Weekly EIA  numbers were net  inline/bearish as Weekly supplies increased by   slimmest of margins,Production increased  as well.These bearish  items were offset by  another increase in oil exports and big jump in gasoline demand,market reaction muted.Moving past the 10:00 time stamp oil has found a bid and is trading up on session high as as the very narrow overnight range finally gets broken.

Heavy selling on the 8:30 SPX pit opening possibly due to the Expiration of Vix futures which settled at all time low below 9! The “jamming” of the Vix futures could have caused an artificial elevation of Spoos and once Vix expired   Fake Floor gone and heavy selling started. Spoos back to unchanged as I type but nasdaq and FANG still trading heavy as the former down 27 handles and the latter as a group down .6%

Bitcoin still reeling from the announcement of Bitcoin cash availability and possibility of insider trading that  caused Cash to run up before official announcement. Bitcoin futures  down 8.5%  on CME  as any Disruptions to the Cyber world not taken favorably by the Crypto currencies.

morning 12-20

Bitcoin having a wild ride overnight as GDAX started trading in bitcoin cash on its website. One issue though is that the company is accusing someone of inside trading as the price moved aggressively before the official announcement from the exchange. Coin base said trading would be halted untill11:00 CST as they investigate. Bitcoin on Coin base traded down to 14K whereas on the other main exchanged the low overnight was still in the mid 15000’s.Plenty of arbitrage opportunity one would think.
The other main story is the continued selling of the long end. Too many longs that are now being Forced to sell, yearend rotation out of bonds into stocks, Curve trade unwind Whatever the reason sellers have upper hand again. Not Just in US but in Europe as well German 30 year yield +13 Bps from Monday’s low, Bond yield 12 Bps higher from Mondays lows.US yield curve continue to steepen quite aggressively as this is the Central Theme for Bond markets.
With one minor hiccup, which is causing the house to vote again on Tax bill, it has a clear path to President Trump’s desk. Next up is the fight to keep Government from shutting down. This likely to occur by midnight Friday unless a new spending bill is voted on or the current one is extended for a few more weeks. Most likely the latter will occur.
US stocks Higher European stock steady to lower. Dollar stronger vs. Yen unchanged vs. Euro. Copper on the bid again as more banks issue positive sentiment for next year. The metal, it has closed higher for 10 consecutive days. Oil in a very, very tight range of 30 ticks. API bullish yesterday as Oil stocks drew down 5.2Mln waiting on EIA numbers at 9:30 .Nat Gas higher as colder weather vs 12 hours ago.Gold +$5

More Treasury Commentary Per IFR news

US GOVTS-Long duration liquidations plus flattener unwinds crush the bond – IFR News

19-Dec-2017 11:08:32 AM

BOSTON, Dec 19 (IFR) – Quite decent volume both in the futures and cash
complexes this morning will lead to near 1 mn TYHs traded soon, underscoring
another big bear steepening move as tax cut passage is virtually assured.

Trader talk swirls around some big real money manager selling, long end duration
liquidation and further flattener exit flows as seen with the earlier big block
steepener buying FVs selling ultra long bond contracts. ULH ultra longs have
been leading the underperformance, though at the height of the selling cash 30s
led the way suggesting wholesale end user liquidations.

And there is no one to take the other side of the trade, skelton staffed dealer
desks just broker paper into the screens which is one reason why real money
portfolios contain more futures positions than ever. Longer yields tacking on
another hefty 6+ bps are near yield resistance/price supports for 10s at the old
high 2.47%, and for 30s first at the 100 day moving average (2.807%), 50 day
mover at 2.814%, and high Bollinger plus trend line at 2.828%. Yield support
starts at the mid Bollinger 2.761% then the 8 day mover pivot 2.752%.

Duncan.Balsbaugh@ThomsonReuters.com

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