Markets keep pushing the ease

June 12, 2019

–Markets are starting the day on their back foot with oil -160 at 51.67 (CLN9) and stocks lower.  Rate futures are higher going into today’s CPI data and ten year auction.  While the ten year yield was essentially unchanged yesterday at 2.138%, the eurodollar strip flattened, with EDU9 and EDZ9 the weakest at -3.0 bps, while reds were +0.75, greens +3.125 and blues +4.0.  EDU9 will become the front contract next week and settled 9784.5 vs EDM9 at 9755.5 (spread of -29.0).  Obviously there’s a cut priced.  The Fed Fund settles reveal an interesting change in terms of ease timing:  the July/August spread settled -18.0, while August/Oct settled -17.5.  In other words, odds of an ease at the July 31 meeting are now higher (by a smidgen) than the Sept 18 FOMC.  It’s been a long time since the Fed moved at an off-quarterly meeting. 

–The big trade of yesterday was a new buy of 100k 0EQ 9862/9887c spd versus 9826 in EDU0 for 3 bps.  The high in EDU0 so far is 9850.  EDU9/EDU0 settled -42 yesterday, but had been as low as -55.5 at the start of the month (M9/M0 low has been -79.75) .  Could the market price 100 bps of rate cuts from September forward?  This call spread indicates that possibility…

–The US says it is planning for a meeting between Trump and Xi later this month but it’s unclear if that’s actually happening.  Protests in Hong Kong are getting a lot of press; it seems as if the issues are becoming larger than just trade. In Europe, Villeroy says the ECB could expand stimulus as ERZ9/ERZ0 slips into inverted territory, trading -0.5/0.0  this morning.

–Notwithstanding a grain report yesterday that saw Corn jump 15 cents, longer term charts of the CRB and BBG commodity indexes are ugly. (Pictured below).  *All Central Banks, All the Time* doesn’t seem to be doing much for the prices of real things…

Posted on June 12, 2019 at 4:59 am by alexmanzara · Permalink
In: Eurodollar Options

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