The day started with some supportive buying which held values in small credit, likely coming against fresh hedge lifting and also soe pricing against March’23 obligations with the expiry now just three weeks away. There was no COT report published on Friday night with the continuing issues being experienced with ION by many brokers leading the CFTC to delay publication until they can be certain that all data has been reported, with no timeline for this provided. Notwithstanding that lack of report, by late morning we were seeing the buying begin to dry up and this led March’23 to drop down into the red with a move to test support ahead of 21c. Selling was coming both from the flat price and spread, and though the index roll doesn’t get underway until tomorrow there seemed to be plenty who were willing to pre-empt it as March/May’23 was pushed beneath 1.20 points. As we moved through into the afternoon this trend continued, with a combination of long liquidation and a lack of significant buying seeing prices further erode, moving in waves as March’23 declined to a low at 20.62. With spreads making up more than 60% of spot volume, rising to more than 70% of May’23 volume it was clear that only modest amounts of liquidation were taking place through the afternoon as the same thin environment which benefitted spec buyers on the rally became their challenge. There was some more pressure exerted during the final hour leading to a new low of 20.58, however the pressure eased ahead of the close to leave settlement a small way above at 20.66. With the highs now some 1.20 points away the question now centres around how far the correction will continue, something that tomorrow will go some way to answering with prices now to the centre of the wild last 2-week range.
There was a positive air about the whites this morning as buying took May’23 almost $4 higher on the call before calming to sit comfortably in the $557.00 area through the first hour. Unlike recent days this placed us ahead of the N.11 market with white premium values regaining some ground, while the March/May’23 spread had also stemmed its recent sharp decline and was holding comfortably either side of -$4.00. As the morning progressed so some cautious selling started to emerge into the front of the board, and though only modest in volume it impacted the price with May’23 easing down to sit beneath $555.00 and show some red on the screen. The bulk of the volume continues to be generated by spreads and this seemed to aid the whites as they edged sideways into the afternoon, however the pressure being imparted upon the raws eventually told with new lows being made during the middle of the afternoon. It was the centre and back of the board which took the greatest hit as prices fell with Oct’23 showing a loss of $9.50 at one stage, keeping its premium relatively in line while May/May’23 surged. By late afternoon as May’23 attempted to pull away from the lows and back towards the centre of the range we were seeing the premium nudging back to $122.00, though whether this recovery can continue is hard to say given that today’s action is likely a relief move following the pressure exerted on March’23 last week. The closing stages played out relatively calmly to leave May’23 settling at $552.00 and March/May’23 at -$2.40, a decent showing in the circumstances though with much work to do if we are not to see continuing correction.
