Archive for the ‘Eurodollar Options’ Category

April 20. News cycle latches on the flattening curve; time to exit

–A couple of quick takeaways from yesterday’s price action.  Stocks and bonds went down together.  Also, implied vol firmed (albeit slightly) in fixed income as yields rose and the curve steepened.  Typically, sell offs haven’t been associated with demand for premium.  The highlight is the short USU 143p position (36k), which is now at the […]

Posted on April 20, 2018 at 5:22 am by alexmanzara · Permalink · Leave a comment
In: Eurodollar Options

April 19. Higher oil, higher commodities, higher rates

–Crude oil and commodities are getting a larger role on the financial stage as CLM8 approaches $70/bbl (late yesterday was 68.80, +2.28, and this morning traded well above 69).  While primarily due to Saudis wanting a higher price, a BBG article notes that BCOM (Bloomberg Commodity Index) has broken out to a new high today. […]

Posted on April 19, 2018 at 5:24 am by alexmanzara · Permalink · Leave a comment
In: Eurodollar Options

April 18. Flatten curve, sell vol – repeat

-Once again new lows in the curve with 2/10 treasury spread at 42.5 bps and red/gold pack spread down to 8.25 bps.  Beige Book is released this afternoon, and while it’s likely to indicate continued growth, the back end of the curve questions the sustainability.  The Beige Book is in preparation for the May 2 […]

Posted on April 18, 2018 at 5:25 am by alexmanzara · Permalink · Leave a comment
In: Eurodollar Options

5/10 treasury spread and the nominal level of rates

Below is a chart with 5/10 treasury spread (white) FF target (amber) and Ten yr treasury yield.  In 2000, 5/10 bottomed at  MINUS 42 bps (as FF were on the way to 6.5% and UST 10yr yield was close to 7%).  In the 2004/2006 hike cycle the spread got to  MINUS 6.25 bps, but both FF […]

Posted on April 17, 2018 at 4:32 pm by alexmanzara · Permalink · Leave a comment
In: Eurodollar Options

April 17. Does the curve mean anything?

–“The level of attention to the recent and mild inversion of the yield curve has bordered on hysteria in the media. Does it portend a recession? Or is, as Ethan Harris, the chief economist of Lehman Brothers suggests, the bond market simply on drugs?”  A clue that this quote isn’t current comes from the Lehman […]

Posted on April 17, 2018 at 5:15 am by alexmanzara · Permalink · Leave a comment
In: Eurodollar Options

April 16. No escalation. For now.

–Markets are responding with relief that Friday’s strike on Syria seems to be contained.  Oil has pulled back from new highs set Friday and stocks have bounced as bonds eased.  Consequences aren’t always immediate. –Friday featured new lows in the curve, with the red gold pack spread -3.75 to 10.875, a test of the low […]

Posted on April 16, 2018 at 5:08 am by alexmanzara · Permalink · Leave a comment
In: Eurodollar Options

April 15, 2018. The tipping point

A lot of economic theory is concerned with what happens at the margin.  How do we determine ‘the tipping point’, the time when critical mass sparks a change? I saw a headline ‘Boeing shares slide after Russia threatens to halt titanium sales’.  I’m not sure if that particular story correctly pegged the price action, but […]

Posted on April 15, 2018 at 1:20 pm by alexmanzara · Permalink · Leave a comment
In: Eurodollar Options

April 13. Weekly wrap

–Another day, another marginal new low in 5/30 yield spread in spite of the 30 year auction.  Spread closed 37.3, down 1 bp; other curve measures holding just above the lows.  Stocks found their footing as US policy seems to consist of threats which are then watered down, and we’re on the back end of […]

Posted on April 13, 2018 at 5:30 am by alexmanzara · Permalink · Leave a comment
In: Eurodollar Options

April 12. Bonds shrugged

–Although there were several high profile events Wednesday, rates were little changed in the US.  CPI was released in the morning at -0.1 and Core of 0.2, but yoy measures were above the Fed’s threshold: 2.4% and Core of 2.1%.  Later in the day, the NY Fed released its Underlying Inflation Gauge (UIG) which also […]

Posted on April 12, 2018 at 5:18 am by alexmanzara · Permalink · Leave a comment
In: Eurodollar Options

April 11. The Good, the Bad and the (inflation) Ugly

–Good: China taking steps to ease trade pressures.  Bad: US may bomb Syria and escalate broader conflict.  Good: Zuckerberg got through Senate testimony.  Bad: Trump considering firing Mueller, Rosenstein, or both. –Yields edged slightly higher yesterday as stocks soared.  Front end of the curve was weakest on the board with whites -2.125 and reds -2.25.  […]

Posted on April 11, 2018 at 5:17 am by alexmanzara · Permalink · Leave a comment
In: Eurodollar Options