Yields Press Lower

May 15, 2019

–In spite of a solid bounce in stocks yesterday, rate futures are at new highs this morning with TYM printing 124-20 (+9.5) and the highest contract on the euro$ curve, EDH21, just printing 9801 (+4.5).   EDH21 prints 50 bps lower in yield than the current libor setting.  Weaker than expected data out of China was a contributor.  Retail Sales +7.2% and Industrial Prod +5.4; nominally big numbers but both much lower than projected.  Quite different from the same data being released today in the US:  Retail Sales expected +0.2 and Ind Production +0.1.  

–Following Salvini’s threats yesterday to ignore the EU’s budget rules, Italian bank shares continue to fall, with the bank index 1.25% today and off 14% from last months high.   

–June treasury options expire a week from Friday.  On the call side, TYM 125 strike has the most open interest currently at 123k, soon to be the atm strike.  Implied vol declined in rates yesterday as stocks rallied, but rate futures and spreads reflected little confidence in a sustained boost in equities as prices barely changed.  EDM9/EDM0 closed right at the recent low of -37.75 and EDM9/EDU9 settled at a new low of -11.25. 

 –Treasury calendar rolls becoming more active in shorter maturities due to negative carry and delivery risks.  About 14% of 2’s and 8% of 5’s have rolled so far.

Posted on May 15, 2019 at 5:15 am by alexmanzara · Permalink
In: Eurodollar Options

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