Jan 4, 2018. FOMC minutes confirm hiking bias

–Curve flatter as the Fed minutes supported the hiking campaign.  Red/gold eurodollar pack spread closed at a new low just under 21 bps (-1.625 on the day).  2/10 notched a new low of 51.2.

–Jan’18/Jan’19 FF spread closed at a new high of 54.5.  Heavy new selling in April’18 FF after the minutes pushed the contract to close -1.5 at 9840.5, which is 18.5 below the Jan’18 contract, indicating 3 in 4 chance of a hike in March.  Good selling in front end of curve after minutes, for example EDZ8 was trading 9784, but fell to 9781.

–This morning, stocks are building on yesterday’s gains, USD is lower, rates higher, oil slightly higher.  Boom times.

–A few trades of note include an early buyer yesterday morning of 80k TYG 125c for 6 to 7.  Open interest up by 40k.  Settled 5 ref 123-25 with 13 delta.  Put and put spread buying is still a theme, for example, +30k EDU8 9787/9762ps for 6.5 (settled 7.0 ref 9792.0).  This trade would likely fill out if there were hikes at the next three quarterly meetings.

–ADP (expected +188k) and Jobless Claims today, the Employment report is tomorrow with NFP 190k.

Posted on January 4, 2018 at 5:17 am by alexmanzara · Permalink
In: Eurodollar Options

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