Locked on 25

July 22, 2019

–Several news services, including BBG and WSJ, are reporting that the Fed will likely cut 25 bps next week.  After a volatile end of the week following NY Fed’s Williams speech on Thursday, the market has comfortably priced 25.  However, additional cuts are also being priced with more confidence.  For example, Aug/Oct FF spread, which isolates the Sept FOMC, fell 2 bps on Friday to -19.5 (-25 would indicate certainty of a cut in Sept).  EDZ9/EDH0 made a new low on Friday of -23 bps.  Of course, EDZ9 trades heavy on the curve due to turn considerations, which is why EDU9/EDZ9 is only -8.5.  

–Longer end of the curve was steady on Friday, with tens rising 1 bp to 2.047%.  Stocks took a late dive related to Iran seizing a UK tanker; prices have been partially reclaimed this morning.  One third of S&P companies report this week.

–Chicago Fed Nat’l Activity Index today, which was -0.05 last and expected +0.10 today.  If expectations are met, it would be the strongest reading since last year.  Worth noting as well, U of Mich 5-10 year inflation expectations released Friday popped up from the previous low point of 2.3% to 2.6. 

–A big thanks to Kevin Muir and Patrick Ceresna of the Market Huddle who hosted a tavern gathering in Chicago yesterday.  Fun time with a good group.

Posted on July 22, 2019 at 5:14 am by alexmanzara · Permalink
In: Eurodollar Options

2 Responses

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  1. Written by BENJAMIN STAMETZ
    on July 22, 2019 at 7:53 pm
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    Found your posts from the Macrovoices link. Nice to hear things from a ED perspective. Thanks

  2. Written by alexmanzara
    on July 28, 2019 at 4:32 pm
    Permalink

    thanks. To all who have posted comments, I hadn’t even been aware that they were posted. In the future I shall try to respond.

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