They ALWAYS buy when the Blues win the Stanley Cup

June 13, 2019

–Crude oil bouncing this morning after plunging over $2/bbl yesterday to settle 5114 near a new low.  I guess that’s good.  Except that the catalyst was an alleged attack on tankers in the Gulf of Oman.  In any case, stocks have also seen buying and rate futures are higher this morning.

–CPI yesterday was slightly lower than expected with yoy Core +2.0.  The ten year auction was well received even though the yield at 2.13 was 35 bps below last month’s  2.479%.   30 year bond auction today.  USU9 was unch’d at the close yesterday at 153-19 even though shorter dates rallied.  At last month’s auction the yield was 2.892, now it’s 2.62.  News that the US gov’t spent more than $3T over the first 8 months of the fiscal year and ran a deficit of $739B doesn’t seem to affect demand for claims on the US taxpayer, because, of course, we’re taking in tariff money.  Right?

–The curve steepened with the euro$ strip rising 2 to 5 bps in price.  Interestingly, odds for an ease in July are now higher than those for the Sept FOMC.  July/Aug FF spread closed -19.5 while Aug/Oct closed -17.0.  We’re in a world of ultimatums.  Trump has said tariffs will go up on China if Xi doesn’t meet, and the market is telling the Fed it MUST ease in July.  Large trades yesterday include buying of October 9825/9850 call spread and call 2×3 for 6.0.  Settles were 8.25 and 3.5 (so 6.0 in 2×3).  A while ago there had been large buying in Oct 9800/9825 call spread for 2.5 to 3.0. I thought the buying of the 9825 strike was a roll up, but open interest in both calls gained, 38k and 52k.  EDZ9 settled +3.5 at 9799.0.    

–I can’t recall where I saw this yesterday, but the ratio of small cap Russell to large cap SPX is near the low of 2016 and not all that far from the lows set in the crisis.  I have re-created the chart below.  That’s probably NOT a sign of solid organic growth in the US economy.

 

Posted on June 13, 2019 at 5:11 am by alexmanzara · Permalink
In: Eurodollar Options

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