Sept 10. Obama to outline ISIS strategy on eve of 9/11

–All near euro$ calendar spreads made new highs yesterday as the market continues to trade heavy in anticipation of rate hikes somewhat sooner than previously expected.  The peak one-year spread continues to be EDZ15/EDZ16 which rose 3 to 107. (Reminder, last year the peak 1-yr spread hit 124 as tens were around 3.0%).  Ten year yield (w/i) rose 3 bps to 2.51 in front of today’s auction.  Weakness again led by the 5 yr, up 4.3 to near 1.76, and green pack which was down 6.5.  5/30 treasury spread flattened by 4 as the long end barely moved.
–A lot of AAPL hype yesterday and this morning related to new product releases.  Price action indicates that most of the news was already built in to the stock, as an initial surge tested the recent high. and then fizzled to end slightly lower.  I would say that US treasuries have the same sort of psychology.  Though NFP was much lower than expected last week, an initial pop in tens couldn’t hold, and there has been somewhat heavy put buying ever since.  ‘Flight to quality buyers’ had already made their allocations into UST.  As Obama auspiciously gives a televised speech tonight, on the eve of 9/11, to rachet up the ISIS plan, a bid for safety may again be evident, but for now it’s all been put buying and call selling.
–Given the Fed schedule of next year, I have watched May ’15 FF which continues to test 9975 or 25 bps, and August ’15 FF which had traded just below 9950 in late July.  There are FOMC meetings on April 29 and July 29 so these are ‘clean’ months with no meetings.  However, they don’t coincide with press conferences so I suppose rate changes are somewhat less likely than at the quarterly meetings.  Yesterday FFK5 settled 9975.5 or 19.5 bps, -1.5 on the day, and FFQ5 settled 9954.5 or 45.5, down 2.0.
–One other small aside is that copper was down around 6 cents to 310.  For the past several years 300 has been a key area of support.  If it doesn’t hold this time around then it may foreshadow weaker global manufacturing.

Posted on September 10, 2014 at 5:38 am by alexmanzara · Permalink
In: Eurodollar Options

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