Beyond Budgets

July 30, 2019

–Yields eased yesterday with tens down 2.6 bps to 2.053%.  The first five years of the euro$ strip were +2 to +3  bps.  This morning rate futures are steady to a bit higher with US stock futures under marginal pressure.  The British pound is sinking due to Brexit worries, now below 1.22.  Bank of Japan kept policy steady but stands ready to add more accommodation without hesitation if circumstances warrant.  The FOMC announcement is, of course, tomorrow, with the market priced for a cut of 25 bps with an outside possibility of 50 bps.  Large trade yesterday was a new buyer of 100k FVU 114.75 puts for 1.  This is a 2 to 3 delta put; every cycle one large player buys these wings.  He also paid 1 for 25k USU 143 puts.  

–The treasury released borrowing plans yesterday.  https://home.treasury.gov/news/press-releases/sm743

“During the July-Sept 2019 quarter, the Treasury expects to borrow $433 billion in privately-held marketable debt,assuming an end of September cash balance of $350 billion.  The borrowing estimate is $274 billion higher than announced in April 2019.  The increase in borrowing is primarily driven by changes in cash balance assumptions.”
Well, apparently the assumptions in April, just 3 months ago, weren’t that great.  $274 billion higher?!?!   I remember when $100 billion  per month really meant something.  Maybe having those way-out-of-the-money treasury puts isn’t so crazy.  New round of democratic debates starts tonight.  Balancing the budget will probably be one of the main topics.  Right?

-Huge data breach at Capital One.  “What’s in your wallet?”  Nevermind, we already know.   

–News today includes Personal Income and Spending, expected +0.4 and +0.3.  The key Core yoy PCE deflator expected 1.7%.  

Posted on July 30, 2019 at 5:14 am by alexmanzara · Permalink
In: Eurodollar Options

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