July 14. BoE decision awaited…

–US stock index futures are soaring to new highs as the Bank of England’s (ease) decision is awaited.  Yesterday’s bond rally is being partially reversed as a result.  The $2 plunge in oil yesterday to two month lows (high inventories) is also seeing a modest reversal, with CLQ up 50 cents this morning.
–Heavy trade yesterday in EDZ6 put options.  For example, EDZ6 9912p bought in size of 50k to sell 200k 9900/9887ps for 0.25 bp.  While it appeared to be a roll up, open interest in all puts declined, by 86k, 184k and 250k.  While not at new lows, the first ten eurodollar one year calendar spreads are all between 15 and 16 bps (though Harker inexplicably suggested a chance of  2 rate hikes this year).
–Beige book yesterday was noncommittal, noting modest improvement in the economy.
–Today’s news includes Jobless Claims, expected 265k, PPI +0.3 with +0.1 Core.
–Dallas Fed President Kaplan said yesterday that the Fed is very sensitive to the strength of the dollar.  Although I am probably taking the comment out of context, it suggests a bias towards looser policy as a stronger USD undermines competitiveness of US exports (while the world is engaged in devaluation wars, with the yuan near a new low of 6.69).  An article on Bloomberg notes that Bernanke, when visiting Japan, suggested that the gov’t float perpetual bonds which the BoJ could completely monetize.  http://www.bloomberg.com/news/articles/2016-07-14/bernanke-floated-japan-perpetual-bonds-idea-to-abe-adviser-honda
Apparently other measures like fiscal stimulus were also discussed.  This in a country where the birth rate is not enough to overcome the death rate.  Sometimes known as a “structural” problem, which monetary policy may not address….

Posted on July 14, 2016 at 5:27 am by alexmanzara · Permalink
In: Eurodollar Options

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