Solid 10y auction

March 13, 2019

–Yields dropped across the board yesterday with solid demand for yesterday’s ten-yr auction.  Tens fell over 3 bps to 2.605.  Euro$ contracts from reds through golds were up 3.5 to 4.5 bps.   Large trades occurred in TYK calls: initially an exit of 50k TYK 123/125 call spreads at 23 to 24 pre-auction, and then a sale of 80k TYK 123.5/124.5cs at 11.  The original positions were longs of ~50k each in 122.5/124.5cs and 123/125cs.  So the latter was exited and on the former, the top strike was rolled down to the 123.5 strike, leaving a long 122.5/123.5 cs which appears to be ratioed, as  there is now more open interest in 123.5 calls (126k) than in 122.5 calls (93k).  In any case, it appears these call spreads were anticipatory to buying the auction, and were unwound/adjusted as the auction occurred.  Yesterday’s settle in TYM at 122-28 was the highest since the spike high associated with stock market turmoil on Jan 3.  

–In euro$’s premium selling continues with back straddles losing 1-2 bps.  The long green 9762.5 straddle strip settled 282 with March about to roll off.  Recall that it was only about a month ago that the then atm 9750 straddle strip traded as high as 372.

–Bonds are bid, stocks are bid, oil is nearing a new high, even gold and silver are rebounding slightly.  GBP is higher this morning despite May’s loss yesterday, leaving another vote today on a no-deal Brexit.  

–In the US, PPI is expected +0.2 month over month, with Core yoy 2.6%.  Durables expected -0.5 vs last of +1.2.  Treasury re-opening auction of 30 year, as the bond yield tries to hold above 3%.

Posted on March 13, 2019 at 5:06 am by alexmanzara · Permalink
In: Eurodollar Options

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