The MissileThe Missile. This information is not to be construed as an offer to sell or a...

This information is not to be construed as an offer to sell or a solicitation or an offer to buy the commodities herein named. The

information of this report has been obtained from sources believed to be reliable but is not necessarily all-inclusive and is not

guaranteed as to the accuracy and is not to be construed as representation by R.J O'Brien & Associates. The risk of trading futures

and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not

indicative of future results. © Copyright 2020

. The Fixed Income Group at R.J. O’Brien. All rights reserved.

www.fixedincomegroup.com

On Bloomberg:

WECO <go>

(All times are CST)

The Missile

http://www.fixedincomegroup.com/







Fed Speak Calendar

(All times are CST)

On Bloomberg: Fed <go>







US Treasury Auction Schedule

On Bloomberg:

NI TRE <go>

NY Fed operational purchases schedule for Friday * 0930-0950ET: Tsy 7Y-20Y, appr $5B

* 1020-1040ET: Tsy 4.5Y-7Y, appr $9B

* 1100-1120ET: Tsy 20Y-30Y, appr $4B

* 1200-1220ET: Tsy 2.25Y-4.5Y, appr $14B

* 1250-1310ET: TIPS 1-7.5Y, appr $5B

* 1340-1400ET: Tsy 20Y-30Y, appr $4B

* 1430-1450ET: Tsy 0-2.25Y, appr $19B







Current Implied Probability of Fed Rate Movement (Futures)

On Bloomberg:

WIRP <go>







Getting Granular

The Fed watches 1-month bills v. 1-month bills 6-months forward.

Below is a chart of 1-month SOFR v. 1-month SOFR 6-months forward,

a poor man’s proxy in futures.

Federal Reserve economists said, watching forward rates relative to those on

current Treasury bills has served traders well in the past.

When the short term forward spread inverts, it indicates easier Fed policy in

the near future.







Forward Curves 4/3/20







SOFR FUTURES IMPLIED 'SPOT' TERM RATES

1-Mo: 0.04265

3-Mo: 0.05867

6-Mo: 0.06292

1-Yr: 0.06685

ICE-SETTLED LIBOR

1-Month Libor Set 0.98513 +.00350 (99.01487)

3-Month Libor Set 1.38738 +.01438 (98.61262)

6-Month Libor Set 1.20888 +.00400 (98.79112)

1-Year Libor Set 1.04988 -.01025 (98.95012)







US-SWAP curve and Treasury 2s/10s chart

IRSB <GO>

Treasury 2s/10s







THEY SAID IT:

The extreme challenge faced by the U.S. economy was made clear by yesterday's shocking news

that 6.648 million people filed for initial unemployment claims in the week ended last Friday

(March 27). That added to the previous week's figure of 3.307 million for a 2-week total of 10

million.

The number of new unemployment claim filings will continue rising over at least the next few

weeks as mass layoffs continue with more states issuing stay-at-home orders and telling non-

essential businesses to close down. Also, there is probably a substantial backlog of applications

at swamped state unemployment offices try to catch up. It is remarkable that state unemployment

systems were even able to process as many claims as they did in the past two weeks.

The consensus is for today's March payroll report to show a decline of -100,000 and for the

unemployment rate to rise +0.3 points to 3.8% from Feb's 50-year low of 3.5%. However,

today's unemployment report will capture very little of the labor market debacle, which didn't

pick up speed until later in March after the survey week.

Next month's report for April payrolls will be truly horrific. Pantheon's Ian Shepherdson, who

was fairly close to predicting yesterday's surge in unemployment claims, is forecasting that the

April payroll report (to be released on May 8) will show payroll job losses on the order of 12-16

million. There is no doubt that over the next 2-3 months, millions more Americans will lose their

jobs than the total of 8.7 million jobs that were lost during the entire Great Recession, which

lasted 1-1/2 years.

Goldman Sachs is projecting that the U.S. unemployment rate will surge from the current 50-

year low of 3.5% to 15% by mid-year. That would be a new post-war high, i.e., well above the

peak of 10.1% seen during the Great Recession in 2007/09 and the current post-war record high

of 10.8% posted in 1982. A 15% unemployment rate this spring, however, would at least remain

below the peak of about 25% seen during the Great Depression.

The only saving grace from the current meltdown is the hope that many jobs can return quickly

once the pandemic is contained and businesses can open back up and rehire their former

employees. Many businesses, in fact, are only furloughing their employees with the hope of

rehiring them when the pandemic eases and economy restarts.

President Trump on Thursday sparked an epic short-covering rally in crude oil prices with a

tweet that said he expects Russia and Saudi Arabia to make big production cuts. Oil prices were

also boosted by the early news that China plans to buy oil at low prices to fill its strategic

reserves. However, oil prices later fell back when Saudi Arabia and Russia were noncommittal

about any production cuts. May WTI crude oil prices on Thursday closed the day up +$5.01

(+24.7%) at $25.32 after having been up as much as 35% on the day's 2-week high of $27.39.







President Trump today is scheduled to meet with top oil company officials to discuss the

situation facing the global oil markets. Mr. Trump's oil-company meeting-partners today will

undoubtedly be pleased with his ability to tweet the crude oil market higher on Thursday.

President Trump yesterday tweeted that, "Just spoke to my friend MBS (Crown Prince) of Saudi

Arabia, who spoke with President Putin of Russia, and I expect and hope that they will be cutting

back approximately 10 Million Barrels, and maybe substantially more which, if it happens, will

be GREAT for the oil and gas industry."

After that tweet, however, Kremlin spokesman Dmitry Peskov said that Mr. Putin has not talked

to the Saudi Crown Prince and that Russia hasn't agreed to cut oil production. For its part, Saudi

Arabia yesterday didn't confirm any cuts but did call for an urgent OPEC+ meeting to reach a

"fair deal" along with non-OPEC+ countries, which is a step in the direction of a deal. There are

reports that Saudi Arabia might agree to a deal if other countries joined a production cut

agreement such as the U.S., Canada, Brazil, and others.

President Trump's tweet about a 10 million barrel cut or more did not specify whether he meant

10 million barrels per day. If so, that would involve massive and unprecedented cuts by all

countries involved but would cover less than half of the 20-30% plunge in global demand caused

by the pandemic. If only Saudi Arabia and Russia were involved in such a deal, for example,

each would have to cut its output by about half.

The idea of the U.S. trying to force its oil companies to cut production in order to cooperate with

Russia and OPEC could also present a delicate political problem for the White House. The White

House would be forcing American consumers to pay higher price at the gas pump, even as

millions of people are losing their jobs, in order to save some U.S. oil companies and prop up

OPEC countries that have been happily fleecing American gas consumers for decades. As usual,

American gas consumers would end up paying the price for any such geopolitical oil deal.

The Fed late Thursday reported that its balance sheet rose to a new record high of $5.8 trillion in

the week ended April 1. That means that the Fed has purchased $1.5 trillion of securities just in

the past three weeks, which nearly equals its entire QE3 program of $1.7 trillion that took about

two years to complete. The Fed has been buying enormous quantities of Treasury and MBS

securities to stabilize those markets and to inject liquidity into the financial system.







EQUITIES

The S&P is -15 and the NASDAQ is -19.

Earnings:

www.moneycentral.msn.com/investor/market/earncalendar

On Bloomberg type in ACDR <GO> UK

In the UK the FTSE closed -1.42%.

BOE Rate +0.75%. (No change).

Next meeting 05/07/20

EU

The CAC Index closed -1.05%.

The DAX Index closed -0.45%.

ECB Main Refinancing Operations Rate 0.00% (No change).

Deposit Facility Rate -.50%


Japan

The TOPIX closed -0.36%.

The NIKKEI closed +0.01%.

BOJ Policy Balance Rate -0.10% (No change).


China:

The Hang Seng closed -0.19%.

The Shanghai Composite closed -0.60%.

PBOC

Deposit Rate: 1.50%

Lending Rate: 4.35%

7-Day Repo Rate: 2.0944%

Reserve Requirement Ratio: 12.50%

http://www.moneycentral.msn.com/investor/market/earncalendar







THE TREND

EDM0: 99-48 is the pivot. Above the pivot you should be long, below short.

Support is at 99-47.5^ and 99-34**

Resistance is at 99-61**. ^Pivot Point is a simple 20-day moving average. ** 2-STD Deviations from the pivot point.

Position that had you short from 99-4.25 03/30/20, has rolled over, resulting in a

6.5 tick loss ($162.50) and a long position from 99-49 (4/02/20).

YTD (per contract)

2019 +151 ticks (+$3,775.00)

2018 +36.5 ticks (+$912.50)

2017 +33.0 ticks (+$825.00)







Ultra 10-year Note (UXYM0): 154-18.5 is the pivot point.

Above the pivot you should be long, below short.

Support is at 154-18.5^ and 149-28**

Resistance is at 159-09** ^Pivot Point is a simple 20-day moving average.

** 2-STD Deviations from the pivot point

Trend that had short position from 151-10 3/18/20, has rolled over resulting in

a 34-tick loser and a long position from 152-13 (03/20/30).

YTD (per contract)

(2020) +298.5 futures ticks ($31.25 per tick) or +$9,328.13









http://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20190918.pdf

Muni IG Curve

The MBIS Municipal Benchmark Curve is a tax-exempt investment grade yield curve that is

valued directly against pre- and post-trade market data provided by the MSRB.

https://emma.msrb.org/ToolAndResources/MBISYieldCurve?daily=True

http://www.msrb.org/~/media/Files/EMMA/MBIS-Yield-Curve-Methodology.ashx

http://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20190918.pdf

https://emma.msrb.org/ToolsAndResources/MBISYieldCurve?daily=True

http://www.msrb.org/~/media/Files/EMMA/MBIS-Yield-Curve-Methodology.ashx







The Fundamentals

LABOR

Bureau of Labor and Statistics

http://www.bls.gov/news.release/

CPI, ECI, Employment situation PPI, CPI, Productivity and Costs, Real Earnings and US

import/exports.

Average Hourly Earnings y/y Department of Labor Department.

Bureau of Labor Statistics

https://www.bls.gov/web/empsit/cesnaicsrev.htm

Nonfarm Payroll Employment: Revisions between over-the-month estimates, 1979-present

http://www.bls.gov/news.release/

https://www.bls.gov/web/empsit/cesnaicsrev.htm







KC Federal Reserve Agricultural Finance Databook

https://www.kansascityfed.org/research/indicatorsdata/agfinancedatabook/articles/2020/1-16-

20/ag-finance-dbk-1-16-2020

The volume of agricultural lending at commercial banks remained elevated but declined for a

second consecutive quarter. Total non-real estate farm loans decreased about 12 percent in the

fourth quarter and declined over consecutive quarters for the first time since early 2017 (Chart

1). Following average annual growth of more than 10 percent in 2017 and 2018 and several

quarters of sharp increases, lending activity contracted in the second half of the year and, on

average, was 5 percent lower in 2019.

Despite decreasing from a year ago, farm lending volumes remained higher than the 20-year

average. Total volume of non-real estate loans averaged about $90 billion in 2019 and was about

8 percent above the average since 1999 (Chart 2). Overall, persistent weaknesses in the farm

sector have continued to stimulate strong demand for agricultural lending, although Market

Facilitation Program payments in the second half of 2019 and relatively strong crop yields may

have curbed demand in the fourth quarter. In fact, on a rolling four-quarter basis, farm lending

has been above the recent historical norm for all but three quarters since 2014.

How do Farm Incomes Compare to the average population

https://www.ers.usda.gov/faqs/#Q4

Charge-off Delinquency Rates on Loans and Leases at Commercial Banks

https://www.federalreserve.gov/releases/chargeoff/delallsa.htm

Baker Hughes Rig Count Overview and Summary Count

https://bakerhughesrigcount.gcs-web.com/rig-count-overview?c=79687&p=irol-

rigcountsoverview

What is U.S. electricity generation by energy source?

https://www.eia.gov/electricity/monthly/epm_table_grapher.php?t=epmt_es1b

Renewable Fuels Association

http://www.ethanolrfa.org/

https://www.kansascityfed.org/research/indicatorsdata/agfinancedatabook/articles/2020/1-16-20/ag-finance-dbk-1-16-2020

https://www.kansascityfed.org/research/indicatorsdata/agfinancedatabook/articles/2020/1-16-20/ag-finance-dbk-1-16-2020

https://www.ers.usda.gov/faqs/#Q4

https://www.federalreserve.gov/releases/chargeoff/delallsa.htm

https://bakerhughesrigcount.gcs-web.com/rig-count-overview?c=79687&p=irol-rigcountsoverview

https://bakerhughesrigcount.gcs-web.com/rig-count-overview?c=79687&p=irol-rigcountsoverview

https://www.eia.gov/electricity/monthly/epm_table_grapher.php?t=epmt_es1b

http://www.ethanolrfa.org/







Rail Traffic

U.S. railroads originated 899,673 carloads in March 2020, down 6 percent, or 57,148 carloads,

from March 2019. U.S. railroads also originated 935,380 containers and trailers in March 2020,

down 12.2 percent, or 130,461 units, from the same month last year. Combined U.S. carload and

intermodal originations in March 2020 were 1,835,053, down 9.3 percent, or 187,609 carloads

and intermodal units from March 2019.

In March 2020, 10 of the 20 carload commodity categories tracked by the AAR each month saw

carload gains compared with March 2019. These included: chemicals, up 5,881 carloads or 4.6

percent; all other carloads, up 2,108 carloads or 9.5 percent; and petroleum & petroleum

products, up 1,688 carloads or 3.5 percent. Commodities that saw declines in March 2020 from

March 2019 included: coal, down 43,611 carloads or 15.9 percent; motor vehicles & parts, down

11,053 carloads or 15.9 percent; and crushed stone, sand & gravel, down 10,482 carloads or 12

percent.

“Rail traffic numbers confirm that the coronavirus is taking a toll on the economy,” said AAR

Senior Vice President John T. Gray. “For example, U.S. carloads of autos and auto parts last

week were down 70% from the same week last year as auto production declined to zero and

consumer spending has begun to shrink demand. While intermodal volume last week was down

year-over-year 14% overall, total movements for the five railroads serving the West Coast ports

remained steady for a fifth consecutive week, reinforcing the expectation that we may have seen

the bottoming of the Asia-North America trade. However, this week also reminded us that the

recent collapse in oil prices is hurting rail shipments of petroleum products, frac sand, and steel

products.

“While there remain more unknowns than knowns about the next few months, there are tidbits of

encouraging news. For example, year-over-year carloads of grain were up in March for the first

time in a year and March was the best month for rail chemical carloads in two years.

“In this time of crisis, many people deserve our praise and respect. Our health care professionals,

who are on the front lines risking their own lives to save the lives of others, are at the top of that

list. But we should also remember that behind the scenes, transportation and logistics providers –

railroad, maritime and air cargo operating personnel, truckers, warehouse workers, delivery

personnel – are also working tirelessly to supply the goods that we simply could not live

without.”

Excluding coal, carloads were down 13,537 carloads, or 2 percent, in March 2020 from March

2019. Excluding coal and grain, carloads were down 15,181 carloads, or 2.5 percent.

Total U.S. carload traffic for the first three months of 2020 was 2,993,051 carloads, down 6.3

percent, or 202,755 carloads, from the same period last year; and 3,178,285 intermodal units,

down 8.6 percent, or 298,297 containers and trailers, from last year.

Total combined U.S. traffic for the first 13 weeks of 2020 was 6,171,336 carloads and

intermodal units, a decrease of 7.5 percent compared to last year.

Week Ending March 28, 2020

Total U.S. weekly rail traffic was 449,767 carloads and intermodal units, down 11.8 percent

compared with the same week last year.

Total carloads for the week ending March 28 were 219,844 carloads, down 9.1 percent compared

with the same week in 2019, while U.S. weekly intermodal volume was 229,923 containers and

trailers, down 14.2 percent compared to 2019.

Two of the 10 carload commodity groups posted an increase compared with the same week in

2019. They were farm products excl. grain, and food, up 348 carloads, to 16,027; and coal, up 34







carloads, to 60,983. Commodity groups that posted decreases compared with the same week in

2019 included motor vehicles and parts, down 12,379 carloads, to 5,423; nonmetallic minerals,

down 3,333 carloads, to 31,159; and metallic ores and metals, down 2,432 carloads, to 20,875.

North American rail volume for the week ending March 28, 2020, on 12 reporting U.S.,

Canadian and Mexican railroads totaled 320,231 carloads, down 8.3 percent compared with the

same week last year, and 306,268 intermodal units, down 14.4 percent compared with last year.

Total combined weekly rail traffic in North America was 626,499 carloads and intermodal units,

down 11.4 percent. North American rail volume for the first 13 weeks of 2020 was 8,490,032

carloads and intermodal units, down 6 percent compared with 2019.

Canadian railroads reported 79,775 carloads for the week, down 5.9 percent, and 61,259

intermodal units, down 15.6 percent compared with the same week in 2019. For the first 13

weeks of 2020, Canadian railroads reported cumulative rail traffic volume of 1,839,042 carloads,

containers and trailers, down 2.7 percent.

Mexican railroads reported 20,612 carloads for the week, down 9.1 percent compared with the

same week last year, and 15,086 intermodal units, down 12.7 percent. Cumulative volume on

Mexican railroads for the first 13 weeks of 2020 was 479,654 carloads and intermodal containers

and trailers, up 2.3 percent from the same point last year.

https://www.aar.org/news/weekly-rail-traffic-for-the-week-ending-march-28-2020/

https://www.aar.org/data-center/rail-traffic-data/

https://www.aar.org/news/weekly-rail-traffic-for-the-week-ending-march-28-2020/

https://www.aar.org/data-center/rail-traffic-data/







Trailer Truck Demand 3/30/20

North American spot trucking relative demand will continue to face volatility from the

coronavirus' shock to supply chains, in our view. Truckstop.com's Market Demand Index (MDI)

plummeted 21% sequentially, appearing to normalize from a sharp increase in dry-van and reefer

demand fueled by panic buying and shippers' rush to restock shelves over the past several weeks.

Year-over-year declines in spot rates, excluding fuel surcharges, have moderated to 5.2% in

2020, from 11% lower in 4Q. Reduced available capacity (down 19% in 2020), surge freight

opportunities and easier comparisons may help drive year-over-year gains in coming months.

USA Truck, Knight-Swift, J.B. Hunt and Werner operate mostly in the contract market, with

varying spot exposure. Brokers such as C.H. Robinson and XPO are also exposed to the spot

market.







GDP

U.S. Department of Commerce, Bureau of economic analysis

http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm

GDP, Personal Income, Outlays, Consumer Spending, Corporate Profits and Fixed Assets

As of 04/02/20 1Q GDP is running at *1.35%, down from *1.95% on 04/01/20.

*simple average of the regionals reporting 1st quarter GDP estimates.

Atlanta Fed Real GDP Nowcast… Q1 2020: 1.3% as of April 2, 2020

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the first

quarter of 2020 is 1.3 percent on April 2, down from 2.2 percent on April 1. After this morning's

data releases from the U.S. Census Bureau and the U.S. Bureau of Economic Analysis, the

nowcasts of the first-quarter real personal consumption expenditure growth and first-quarter real

gross private domestic investment growth decreased from 1.3 percent and 2.4 percent,

respectively, to 0.5 percent and 0.8 percent, respectively.

The next GDPNow update is Thursday, April 9. Please see the "Release Dates" tab below for a

list of upcoming releases.

https://www.frbatlanta.org/cqer/research/gdpnow

St. Louis Fed Real GDP Nowcast… Q1 2020: 1.25% as of April 1, 2020

https://fred.stlouisfed.org/series/GDPNOW

NY Fed GDP Nowcast… Q1 2020: 1.5% as of March 27, 2020

The New York Fed Staff Nowcast stands at 1.7% for 2020: Q1 and 0.3% for 2020: Q2.

News from this week’s releases, covering data for February and 2019: Q4, increased the nowcast

for 2020: Q1 by 0.2 percentage point and increased the nowcast for 2020: Q2 by 0.2 percentage

point.

Positive surprises from February’s manufacturing data accounted for most of the increase.

https://www.newyorkfed.org/research/policy/nowcast

Manufacturing at a Glance

January 2020

http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm

https://www.frbatlanta.org/cqer/research/gdpnow

https://fred.stlouisfed.org/series/GDPNOW

https://www.newyorkfed.org/research/policy/nowcast







https://www.instituteforsupplymanagement.org/ISMReport

https://www.instituteforsupplymanagement.org/ISMReport







US Census Bureau (Manufacturers’ Shipments, Inventories and Orders). http://www.census.gov/manufacturing/m3/

Ranking of Countries by Military might.

www.military.com

Our Nation in numbers

The Constitution gives us four missions… 1. Establish Justice and Ensure Domestic Tranquility. 2. Provide for the Common Defense. 3. Promote the General welfare. 4. Secure the Blessings of Liberty to Ourselves and Our Posterity. www.usafacts.org

US Foreign Assistance http://foreignassistance.gov/

How much aid do we give around the world?

https://explorer.usaid.gov

CBOT Non-Commercial Net Total – Futures Only

http://www.cmegroup.com/trading/interest-rates/cftc-tff/main.html

http://www.usfunds.com/interactive/the-periodic-table-of-commodity-returns-2019/#.XDjAAlxKiUk

http://www.census.gov/manufacturing/m3/

http://www.military.com/

http://www.usafacts.org/

http://foreignassistance.gov/

https://explorer.usaid.gov/

http://www.cmegroup.com/trading/interest-rates/cftc-tff/main.html

http://www.usfunds.com/interactive/the-periodic-table-of-commodity-returns-2019/#.XDjAAlxKiUk







The Fixed Income Group at R.J. O’Brien

John Coleman

312-373-5190

800-367-3349

© 312-515-3067

[email protected]

Rob Powell

312-373-5197

800-367-3349

© 312-560-7112

[email protected]

Jeff Bauman

312-286-0491

[email protected]

Rich Goldblatt

312-373-5450

800-367-3650

© 312-515-6019

[email protected]

Rocco Chierici

312-373-5439

800-367-3650

© 312-515-3069

[email protected]

Brian Rachwalski

312-373-5191

800-367-3349

© 312-515-3066

[email protected]

Dan Sobolewski

312-373-5191

800-367-3349

© 312-505-6364

[email protected]

Evan Vollman

312-373-5452

800-367-3650

[email protected]

Corrine Baynes

312-373-4847

800-367-3349

[email protected]

Matthew Surwillo

312-373-4958

800-367-3349

[email protected]

mailto:[email protected]












The MissileThe Missile. This information is not to be construed as an offer to sell or a...

Documents

Transcript of The MissileThe Missile. This information is not to be construed as an offer to sell or a...