Europe in reverse

April 4, 2019

–Yields rose yesterday with tens up 3.7 to 2.515% and 30-yr bonds marching back towards 3%, up 4.2 on the day to 2.927%.  However, US data yesterday was on the weak side with ADP at just 129k and Service ISM 56.1 vs an expected 58.  This morning German Factory orders for Feb came out at -4.2%, -8.4% yoy.  Italy is reportedly slashing its 2019 growth forecast from 1% to 0.1%.  The bund has now slipped back to a negative yield.

–New buyer yesterday of 40k EDZ9 9850c for 1.0.  These are 98 bps out of the money.  On the downside EDZ9 9712.5p also settled 1.0. 39.5 out of the money.  If things go bad, there’s a chance they go really, REALLY bad.  But if things go good, the Fed has effectively been handcuffed in terms of tightening.  Thanks President Trump, we’ll do your bidding in stocks on that.

–On March 5, before stocks sold off into the middle of the month, the atm red June midcurve atm straddle ( 0EM 9737^) settled 23.0 bps.  With one month having elapsed, the current 0EM atm straddle is  the 9775 strike, which settled 24.5.  Apparently, some perceptions of risk have increased, even as SPX is up around 75 points from March 5, and VIX was 14.8 in early March, and is now 13.8.  

Posted on April 4, 2019 at 5:49 am by alexmanzara · Permalink
In: Eurodollar Options

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