Sideways behavior

March 6, 2019

–Welcome to new recipients…unfortunately yesterday didn’t provide much market action to talk about.

–Yields were essentially unchanged on the day, with implied vol continuing to seep out of option prices.  In rate futures, it’s been a sideways trade since the middle of January.  As an example, on January 11, the Green pack euro$ 9750 (atm) straddle strip traded 370-372 on large lifts of atm calls.  That day marked the high of the strip, which has been compressing ever since, and settled 299.5 yesterday (identical contracts).  Since a couple of months have passed, a better comparison will be the ‘new’ long green pack 9750^ strip: EDM1, U1, Z1, H2, and that settled 321.5.  EDH19 expires on the 19th and contracts will shift forward.

–I don’t know if it’s a reflection of low volume, but CME shares closed -2.39% yesterday while ICE fell 1.05% on a day that SPX was -0.11%.  CME nearing the low of the year.

–On the euro$ curve, reds were especially weak, closing down 3.0 (with greens -1.625, blues -0.625 and golds -0.25).  Red pack to deferreds made new spread lows with red/gold -2.75 to 7.625 (new low since mid-Dec).  One option trade exemplified the move: Buyer of 13k 0EU 9712 put for 5.0 vs selling 10k 4EU 9712 put at 9.0 (pkg price 25.0).  Settled 4.5 v 9746 in EDU0 and 8.0 v 9734.5 (pkg 21.0s).

–BBG base metals index near the high of 2019, with some pointing to copper’s recent strength as a sign of resurgence.  However, oil appears ready to roll over and the Baltic Dry Freight Index continues to languish near the low set in early Feb.  This shipping index plunged from 1400 in mid-Dec to the low of 600 and is now 669.

–OECD cut forecasts for the global economy in 2019 and 2020 citing trade disputes, uncertainty about Brexit and Europe.  

–Business Insider’s Most Important Charts indicates a high level of concern about odds for a near-term recession.  New today includes ADP and Trade Balance.

BBG Base Metals Index
Posted on March 6, 2019 at 5:09 am by alexmanzara · Permalink
In: Eurodollar Options

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