Preparation is key

February 6, 2023

–Huge NFP of 517k saw rate futures fall like an anvil.  Red pack in SOFR (H4, M4, U4, Z4) down 24.75, but the average price is still above 9651, or just 3.49% when the Fed just hiked to 4.50-4.75.  FFG4 settled -25.5 at 9559.0 or 4.41%.  This contract captures the next eight meetings and is just a bit over 8 bps away from the current FFG3 at 9542.75.  Of course, there is plenty of fluidity in between, with the lowest FF contract right in the middle, July’23 (FFN3) at 9498 or 5.02%.  SFRZ3 atm 9550 straddle settled 69.25.  

–The week ahead will likely require geopolitical calculus, as alluded to in the attached picture.  Powell speaks tomorrow and there are a bunch of Fed speakers on Wednesday who will be crafting economic roadmaps (figuratively) through treacherous canyons.  Preparations are ongoing, using Chatgbp, strike that, I meant THE ACME CENTRAL BANK MANUAL.  Markets will respond by warmly embracing the $96 billion in auctions of 3s, 10s and 30s starting Tuesday.  The thirty year when-issued yield was 3 5/8% on Friday.  If I were Yellen I’d cram as much as possible down the throats of the coyotes to lock that rate.

–Lowest SFR contract is June’23 at 9499 or 5.01%.  Highest on the strip is Dec’25 at 9712 or 2.88%,  A difference of 213 bps.  However, a big chunk of that is captured in the lowest one-year calendar SFRU’3/SFRU’4 at -164.    

Posted on February 6, 2023 at 5:15 am by alexmanzara · Permalink · Leave a comment
In: Eurodollar Options

Jay’s World

February 5, 2023 – Weekly Comment

Let me bring you up to speed. My name is Wayne Campbell. I live in Aurora, Illinois, which is a suburb of Chicago – excellent. I’ve had plenty of jo-jobs; nothing I’d call a career. Let me put it this way: I have an extensive collection of name tags and hairnets.
-Wayne’s World

Leisure and hospitality added 128,000 jobs in January compared with an average of 89,000 jobs per month in 2022. Over the month, food services and drinking places added 99,000 jobs, while employment continued to trend up in accommodation (+15,000). [BLS] 


I’m not making fun of these jobs.  When I was a kid, I was trying to work up to when I would actually GET a name tag.  Department store clerk (Wieboldts), liquor store stockboy (Armanetti’s), painter.  I had all those jobs before I became a runner on the CBOT floor.  I’ve got a copy of my first Rudolf Wolff paycheck somewhere…those were the days when all the runners knew where good ‘happy hour’ bars were that would have some sort of a free buffet, so they could have dinner for the price of a few beers. The point is, those jobs don’t pay a lot.

How do we get a number of 517k for NFP when (tech) layoff announcements are becoming prevalent? From John Mauldin:  “The household data looked huge at 894k jobs added.  Except the BLS made a normal ‘adjustment’ to the population control data which actually added 810k of those jobs.  That puts the HH survey much more in line with the ADP report of 106k jobs.  Seasonal adjustments also had a big effect this time.  Jobs growth, while still strong, isn’t as strong as January’s report suggests.”   

https://www.bls.gov/news.release/empsit.nr0.htm

[Data above is in a table about ¾ way down]

So what did the markets do?  Rate futures erased the rally from Wednesday’s FOMC.  On Tuesday TYH3 was 114-165.  Thursday’s settle 115-175.  Friday 114-135.  A bit more aggressive in short rates (same days), SFRM4 9650.5, to 9669.0 to 9643.0.  FFG4, a year forward, settled 9559.0 or 441 bps, down 25.5 on Friday.  As if the market simply said, ‘let’s remove one of those quarter-point eases we had priced in, because this was a big number.’  As an aside, about 1.25 hours before the release on Friday, someone sold on block, 13996 FFF4 at 9559.0.  That contract settled 9538.  Probably just a coincidence.  At least he had the decency not to cover on Friday afternoon; open interest was +14493.  

Also from Mauldin’s weekend piece, quoting Michael Wilson of MS:

As we have noted many times over the past year, the over-earning phenomenon this time was very broad as indicated by the fact that ~80% of S&P industry groups are seeing cost growth in excess of sales growth.

Costs rising faster than sales.  Not that great for stocks, one would think.  I am way over my head in terms of analyzing quarterly earnings reports. (What I DO remember though, is a new manager at the liquor store having us re-stock the shelves with the best sellers on the easy-to-get-to top shelf, and that we had to tag the prices near the top of the label on the right side, so that the cashiers could always see the price quickly and keep those conveyers moving).

So let’s look at the big retailer: AMZN.  Not the report, just the price action. 

That’s what we call an island top.  All of Thursday’s huge volume, underwater on Friday.  Down 8.4%.  But I thought I’d look a bit closer at another company, Starbucks*. 

From last week’s report, North American revenues (Comp store sales) +10%, of which 1% was change in transactions and 9% was Change in Ticket.  So a bit better than inflation.  While Operating Income was up 12% to 1212.4 (millions), operating margin compressed over the year from 18.9% to 18.5%. [these results are just N Amer; about 17% of SBUX stores are in China]. Is this what MS’s Wilson is talking about?  Anyway, the stock took a profit-taking dive Friday, down 4.4%.   Scrolling down in SBUX report, “the company announced the expansion of a partnership with DoorDash…with the goal of full nationwide availability in all 50 states by March 2023.” (isn’t that what nationwide means?). So how’s DoorDash doing?  Losses as far as the eye can see.  HOW DO WE DO IT? VOLUME. Reported losses proudly exceed estimated losses (and growing) for the past 4 quarters, with the last Sept 2022 qtr at -77 cents per share.  Stock closed at 59.02, down 7.48% on Friday, and, like AMZN, completely reversed an upward surge from Thursday. 

Starbucks: “Let me get this straight, you’re going to subsidize every delivery made at the expense of your shareholders?”  DoorDash “YES WE ARE”.  Starbucks, “OK, we’d like to expand our relationship with you!”

As a BBG article headlined: The Fed is all that Matters… “The profit outlook for companies in the S&P 500 Index is rapidly deteriorating – yet analysts can’t raise their stock-price targets fast enough.”

My conclusion is that the market really isn’t fully buying into headline strength of the payroll report.  Expectations remain for another 25 bp hike in March.  However, a spread like SFRU3/SFRU4 settled -164, up only 2.5 on Friday, just 13 higher than the lowest settle of -177, which is also the most negative of any one-year calendar spread for the cycle.  The market is convinced of a slowdown that will necessitate eases beginning some time this year.

Auctions of 3s ($40b), 10s ($35b) and 30s ($21b) start on Tuesday. Only raising $29b new cash.

Powell speaks Tuesday.  Williams and Waller and Barr and Bostic and Cook and Kashkari all on Wednesday. If they need to hone the message, the opportunity is this week.

OTHER THOUGHTS /TRADES


Last week I mentioned SFRM3/Z having settled -48, “a rough indication that the market expects 50 bps of ease in 2H.”  Well that, of course, was a bit loose in terms of a conclusion, as a friend pointed out.  On Friday, SFRM3/Z3 settled -45.5.  One might think that a ‘higher for longer’ FF target would be justified given the blockbuster payroll report, and that this spread might have gone much more positive, say to -37ish.  Maybe it’s more instructive to look at FF contracts for cleaner estimates of Fed hiking.  FFN3 is the lowest contract settle on the FF strip at 9498, and the only one above 5%.  There are three meetings in front of this contract: Mar 22, May 3, June 14.  There is also a meeting on July 26, which would affect the last 5 days of the contract.  Current EFFR (as of Thursday) is 458.  FFN3 is 44 bps higher at 502.  There is no FOMC meeting in August.  That contract (FFQ3) settled 9500, exactly at 5%.  According to BBG, the first meeting in January 2024 is the 31st.  So the spread from August’23 to Jan’24 is an adequate estimate for tightening in the last half of the year. That spread is -38 (9500/9538).      

Huge buyer this week of SFRZ3 9550/9750cs 33 to 35 (90k).  Settled Friday at 29.75 ref Z3 9544.5.  Somewhat interesting was buying of 94.50 SFRZ3 puts for 4.5 on Friday.  Not big size, only 13k traded; settled 5.75.  However, it’s a 5.5% strike, an upper estimate for year-end of the more hawkish analysts. Once again, I’ll mention 0QM3 (June 16, 2023 expiration on SFRM4 underlying) 9550p, which settled 5.75 on Friday (up 1.25 on the week) vs SFRM4 9643.0.  Open interest in this strike is still the most of any midcurve SOFR put, at 243k. 

1/27/20232/3/2023chg
UST 2Y420.5429.99.4
UST 5Y362.1366.24.1
UST 10Y351.8353.01.2
UST 30Y363.4362.4-1.0
GERM 2Y258.0254.7-3.3
GERM 10Y223.9219.2-4.7
JPN 30Y157.3151.2-6.1
CHINA 10Y292.8289.5-3.3
SOFR H3/H4-92.0-83.58.5
SOFR H4/H5-99.0-107.0-8.0
SOFR H5/H6-7.5-8.5-1.0
EUR108.69107.99-0.70
CRUDE (CLH3)79.6873.39-6.29
SPX4070.564136.4865.921.6%
VIX18.5118.33-0.18

https://s22.q4cdn.com/869488222/files/doc_financials/2023/q1/1Q23-Earnings-Release-Final-(2.2).pdf

https://www.nasdaq.com/market-activity/stocks/dash/earnings

*I’m short SBUX

Posted on February 5, 2023 at 11:31 am by alexmanzara · Permalink · Leave a comment
In: Eurodollar Options

Transitioning

February 3, 2023

–Employment data today with NFP expected 190k and Avg Earnings yoy at 4.4% (from 4.6 last).   Jobless Claims were again low yesterday at 183k, but Challenger layoffs jumped.  I’ve attached a chart and link from Chris Long, “Excluding 2020, we haven’t seen anything like this since Nov 2008 and January 2001.”  At the cusp of a hard slowdown in the labor market?

https://www.linkedin.com/posts/clong447_federalreserve-monetarypolicy-recession2023-activity-7026912367879811072-BUZy?utm_source=share&utm_medium=member_desktop

–Post-close earnings reports by AAPL etc, put a lid on frothy price action during the day.  A headline on ZH says it was the largest trading day for options of all time.  Currently ESH down 34.50 at 4157.  

–In the wake of the BOE meeting, Sonia March’23/March’24 spread plunged from -32.5 Wednesday to -61.5 yesterday!  In the US Sofr March’23/’24 is -104, down 2 on the day (9518/9622).  

–In the US, the ten year yield was little changed at 3.398%, but 2s fell 2 bps.  Worth noting, as futures ‘transition’ into SOFR from ED, is that SFRH3/EDH3 spread has collapsed to a new low for the cycle at 13 bps.  The transition adjustment is double that.  Does that mean that rates on the futures curve are being artificially set 1/8% lower than they ‘should’ be?  Probably not, but the compression in the only libor-based futures spreads that actually trade with a spread, March at 13 and June at 16.5, sort of enhance the ‘risk-on’ cocktail.

–SOFR straddles also continue to compress.  Not that there’s much trade in the long greens, but those straddles were marked down by 3.5 to 5 bps.  What DID trade was SFRZ3 9568.75^, which was sold (new) 25k, settling 66.75 ref 9570. Dec atm straddles have been sold heavily since December.  There is a LOT of open interest in both calls and puts in SFRZ3, more than 2.5 million in both. 

courtesy Chris Long
Posted on February 3, 2023 at 5:19 am by alexmanzara · Permalink · Leave a comment
In: Eurodollar Options

Powell greenlights risk

February 2, 2023

–A friend deemed yesterday as a “tactical error” by Powell, which would create a rally in risk and housing, thereby encouraging the same conditions that helped spark inflationary impulses in the first place.  The gold market likes it, with GCJ at new recent highs of 1971, up $28/oz.  Powell sees disinflation in goods…making clear progress.  Stocks surged.  On Tuesday, Timiraos noted that Fed staff had elevated concerns regarding the persistence of inflation; yesterday Powell seemed to ignore that message. If you wanted to tempt the fate of backsliding, you accomplished it.

–Five yr yield plunged 14.7 bps to 3.493%, tens down 13.6 to 3.393%.  On the SOFR curve, reds (2nd yr forward) were up 15.625 to an avg price 9673.375, and greens up 15.625 to 9728.375.  April FF only up 0.5 to 9521.5, indicating expectations of another 25 bp hike in March (Current EFFR is 458, another 25 would be 483 or 9517).  SPX up over 1%, Nasdaq Comp +2.0%, new low in the dollar index.

–Massive buying of SFRZ3 call spreads contrubuted to an increase in open interest of that contract of 43k.  Settled 9568, +9.5.

Buyer (pre-meeting) of 90k SFRZ3 9550/9750cs 33 to 35.  Settled 40 (43.25/3.25) with net 52 delta vs 9568.  OI in the strikes +71k and +61k.  The 9575/9775cs also bought 25 to 25.5, settled 29.25 (31.5/2.25) net 43 delta. OI +22.5k and +26k.

–ECB and BOE today.  US employment report Friday has likely become less significant.

On Tuesday I marked the Wednesday expiration atm straddles: TY 114.5^ was 36 and US 130^ was 62.  The market blew through upper breakevens of 115-02 (115-15+s) and 130-31 (131-21s).

Late markets for Friday’s expiry: 
TYH2 115-13
Friday 115.5^ 0’48/0’50
USH3 131-14
Friday 131.5^ 1’23/1’26

Posted on February 2, 2023 at 5:45 am by alexmanzara · Permalink · Leave a comment
In: Eurodollar Options

FOMC day

Feb 1, 2023

–What happened Tuesday?  Monday was reversed, that’s all.  FVH3 settle Friday 109-10, yesterday 109-0775.  TYH3 Friday 114-195, yesterday 114-165, USH 130-05, yest 129-28.  SFRM4 9652.5 to 50.5.  ESH3 4084.25 to 4090.0  CLH3 79.68 to 78.87.  FOMC today.  Powell pushback against pivot.  June’23/Dec’23 SOFR calendar settled -48 (9510.5/9558.5).  If Powell is successful, then this spread should move more positive…maybe to -42?

–What’s the terminal rate?  Every SOFR contract for two years, from March’25 to March’27 is between 9706.0 and 9716.0.  So 2.75-3.0%.  

–FFG3 settled 9542.0.  FFJ3 9521.0.  Ten year 3.53%

–I marked this week’s atm straddles late yesterday (for today and Friday expiration) given all the interest in 0-1 dte.

TY Wed 114.5^ 35/36     

b/e 113-305/115-015

TY Fri   114.5^ 60/61

b/e 113-180/115-140
       

US Wed 130^ 61/63
b/e 129-01/130-31

US Fri   130^ 143/145
b/e 128-10/131-22

–ADP expected 180k, ISM Mfg 48 from 48.4, and JOLTs 10300k

Posted on February 1, 2023 at 5:13 am by alexmanzara · Permalink · Leave a comment
In: Eurodollar Options

Fed staff supports Powell

January 31, 2023

–A tweet from WSJ’s Timiraos yesterday: “Last month, the Fed’s staff revised its economic outlook in ways that imply inflation will be more persistent. ‘It was a significant move,’ said Riccardo Trezzi, a former Fed economist. ‘The staff is telling the committee, You cannot give up now.'”

–In a way, that clip captures market sentiment yesterday: the curve flattened with 2yr up 5.2 bps to 4.257% and 10yr up just 3.2 to 3.55%.  On the SOFR curve, reds led the way, closing down 9.5, with greens -7.75 and blues down 6.0.  Near one-year calendars rallied on the higher-for-longer bias, with SFRU3/SFRU4 up 6 bps to -149.5 (9522.5/9672.0; still the most inverted 1yr on the curve).  SFRZ3/Z4 settled -135 (9553.5/9688.5), a nice bounce from last week’s block buy of 49k at -146.0.

–When reading the FOMC minutes, staff description of the economy and financial conditions can occasionally strike a much different tone from comments by participants of the committee.  Recently I had read that Powell was upset staff hadn’t initially warned of the danger that inflation would be more persistent rather than transitory.  Last month’s tweak could be a response to that.  In any case, the market is locked onto an increase of 25 bps tomorrow.

–The IMF raised its global growth forecast, yet CLH3 is down over $1/bbl this morning at 76.76.  Stocks also starting lower, but there are a lot of earnings reports (CAT MCD SNAP XOM to cite a few)

–News today includes Emp Cost Index for Q4, expected +1.1%, Chgo PMI expected 45.1 vs 44.9 last, Consumer Confidence 109.   

Posted on January 31, 2023 at 4:57 am by alexmanzara · Permalink · Leave a comment
In: Eurodollar Options

Funding

January 29, 2023 – Weekly Comment

The above is a chart of various rates.  White is Fed Funds midpoint, blue is the 2y treasury, purple the 10y, green the bankrate avg 30y mortgage, and red is yoy CPI. 

Next week the Fed is going to raise the FF range to 4.5-4.75% with a midpoint of 4.625% and EFFR of 458 bps.  It’s already the case that FFs are above everything on the treasury curve, and that negative carry is going to get a bit more extreme with the increase in overnight funding.  Regarding CPI and the 30y mortgage, there has been a small crossover there as well.  This probably is NOT the appropriate way to think about it, but I sort of imagine CPI as being a rough proxy for housing.  If the 30y mortgage rate exceeds the appreciation rate of housing, it likely works to stifle prices. 

Powell is going to emphasize at the press conference that easing is NOT likely to occur this year.  To me, it doesn’t much matter whether he says it aggressively or gently, the fact is, high funding costs are restrictive. Core PCE prices (yoy 4.4%) are already below the new FF target of 4.625%.  As macro guru Ted Nugent might say, “Got you in a stranglehold baby.” Powell has already alluded to the idea that it’s not the exact level of terminal rates the Fed needs to achieve, it’s the duration.  All he has to do is convince the market of the Fed’s resolve and let it happen.

Below are some excerpts of Market Huddle’s (Kevin Muir) interview of Nomura’s Charlie McElligott.  Quotes are lightly edited for brevity.

McElligott refers to “…immaculate disinflation” and asks “…what does that mean? It means relative to where we were on terminal rates a few months ago, that the faster than expected disinflation that we’re seeing means past peak inflation, past peak Fed, means a lower terminal rate, and that is a defacto rate cut.  So you’re seeing a big resumption in vol selling strategies again…and that feeds into the behavior of meme stocks, behavior of high yield etc.”

Below I have inserted a chart of the MOVE/treasury vol index, which is nearing the lows of last year.  VIX is also at the low end of last year’s range.

While the clip above identifies what is currently happening, in the excerpt below McElligott notes that the rapid shift in financial conditions supporting better growth may elicit a more hawkish tone from Powell:  

“.. nobody had anticipated… this growth stabilization globally and how quickly it happened and how all three forces aligned at the same time, and when you’re talking about, in the span of a couple of weeks as I said, you’re seeing 200 bps tighter in hi-yield spreads, you’re talking 90 bps lower in 30yr jumbo mortgage, seeing re-acceleration in housing data, and durable goods and jobless claims still beating and nominal GDP is at 7 or 8%!  If housing re-stabilizes and that kicks off animal spirits and a wealth effect back into the market, all of the good work that you’ve done with regard to trying to lean into demand-side inflation is very much at risk and then that whole ghost of Arthur Burns situation starts coming up again…it is the velocity of this FCI easing into the recent data beats has changed the calculus on Powell next week.”

He also noted that 0 to 1 DTE (days to expiration) options in SPY are around 68% of total volume. If short on time, listen from about 1:20 forward.  

https://twitter.com/TheMarketHuddle/status/1619164583486279681

With respect to real estate and animal spirits, it’s worth noting a twitter thread on Wednesday by Redfin CEO Glenn Kelman saying that housing is recovering, better than expected. He concludes, “The market could still easily falter.  But housing in January has been stronger than anyone could’ve hoped.”  Redfin (RDFN) stock was up 19.7% on Friday.  High since Sept. 

Big week for news, with FOMC result Wednesday,  ADP, ISM Mfg and JOLTs also on Wednesday.  Employment Report on Friday, with rate expected 3.6% and NFP 190k. 

OTHER THOUGHTS /TRADES


FFG3 settled 9542.5; the market is locked on a hike of 25 which should make FFG3 final settle 9542.9.  The next FOMC is March 22.  April is a ‘clean’ month; FFJ3 settled 9521 or 479 bps.  Another 25 bp hike in March would make EFFR 483 (9517 for FFJ3). 

SFRM3/Z3 settled -48 (9511, 9559, +6.5 on the week), a rough indication that the market expects 50 bps of ease in 2H. 
SFRZ3/M4 settled -93.5 (9559, 9652.5, +10 on the week).  Still inverted by nearly 1%, though going into FOMC the market is gingerly paring back easing expectations.

0QM3 (June 16, 2023 expiration on SFRM4 underlying) 9550p settled 4.5 vs 9652.5.  These puts have the highest open interest of any midcurve at 213k, up nearly 16k on Friday.  An original 40k block was bought paying 5 ref 9661, so vol has obviously declined.  Low print last week was 3.5 ref 9664.  SFRZ3 is 9559, so if the Fed renews its assault on growth and inflation, a roll-down in SFRM4 could approach strike.  Delta is -0.11.

Feb SOFR midcurves expire one week from Friday on Feb 10.  SFRH4 settled 9608.  I wouldn’t be surprised to see demand for 0QG3 9587.5p going into the Fed, settled 3.5.  9575p settled 1.5.

On January 6, SFRZ3 settled 9559.5 and the 9562.5^ settled 86.5.  Three weeks later, on Friday, SFRZ3 settled 9559.0 and the 9562.5^ at 69.5, a 20% decline.  

Just a couple of commodity notes: At the beginning of September the front NatGas contract was $9.  Now it’s just over $3.  In March, Lumber was over 1400, now it’s just under 500.  In June, BCOM (bbg commodity index) was over 135, now 111.  In June WTI was over 120, now 80.  Perhaps these moves spur a disinflationary mindset, but Powell still might feel the need to press against strength in the labor market and housing.  Again, from Nugent’s stranglehold, “And if a house gets in my way baby/You know I’ll burn it down.” 

1/20/20231/27/2023chg
UST 2Y412.0420.58.5
UST 5Y354.2362.17.9
UST 10Y348.2351.83.6
UST 30Y365.3363.4-1.9
GERM 2Y257.7258.00.3
GERM 10Y217.7223.96.2
JPN 30Y152.3157.35.0
CHINA 10Y292.8292.80.0
SOFR H3/H4-104.0-92.012.0
SOFR H4/H5-100.0-99.01.0
SOFR H5/H6-3.5-7.5-4.0
EUR108.57108.690.12
CRUDE (CLH3)81.6479.68-1.96
SPX3972.614070.5697.952.5%
VIX19.8518.51-1.34
Posted on January 29, 2023 at 8:45 am by alexmanzara · Permalink · Leave a comment
In: Eurodollar Options

PCE prices today to set tone for FOMC next week

January 27, 2023

–Today’s news includes the Fed’s preferred measure of inflation, PCE prices.  M/M expected 0.0 with Core +0.3%.  YOY expected 5.0% from 5.5% with Core 4.4% from 4.7%.  FOMC is Wednesday.

–Yesterday’s economic data generally good, with Jobless Claims surprisingly low at 186k.  Advance Q4 GDP 2.9%.  The last Atlanta Fed Q4 GDP estimate was 3.5%, so the official reading will likely be revised slightly higher over time.  Another solid auction cycle wrapped up with the 7y.  The ten year yield rose 3.5 bps to 3.489%.  

–Large buy SFRJ 9525/9537.5cs for 2…. 45k.  Settled 2 ref SFRM3 9511.5, open interest in the two strikes changed +22k and +10k. 0QM3 9550p more bought…4 paid 20k on block ref SFRM4 9658.5, which is right where it settled.  Earlier in the week, 5 was paid ref 9660.5, so vol has declined significantly. OI in the strike is now 197k (+26.7k), the most of any midcurve put in SOFR.  Curve suggests a tailwind due to roll-down, with SFRH4 futures at 9612.5 and SFRZ3 9562.0.  0QH3 9550p (short March midcurve on SFRH4) settled 2.0, so roll isn’t quite offsetting the passage of time.  There is a lot of ease priced into the curve; SFRM3/M4 is -147 (9511.5/9658.5).   How forceful will Powell be next week in terms of hammering home the NO EASE message?  As financial conditions ease, Powell could use this opportunity to reinforce the succinct theme from Jackson Hole: the Fed will stay tight until the job is done. 

–Nasdaq 100 closed just above the 200 DMA while Nasdaq Comp closed right at that level.  Somewhat interesting as all the big stocks, AAPL, GOOGL, AMZN, MSFT, META TSLA, are well below 200 DMAs.  CLH3 currently 82.01, up an even dollar; this has been a pivotal level since last September, and a close above 82 would suggest follow-through strength.

–Japan Core CPI 4.3% with 10y JGB nearing the 50 bp cap again.  There’s a lot of press about Adani Group companies in India getting crushed due to a report from Hindenburg alleging fraud.  Not sure of a spillover effect, but it comes right after reports of India’s population overtaking China’s.

Posted on January 27, 2023 at 5:04 am by alexmanzara · Permalink · Leave a comment
In: Eurodollar Options

The Vengeance

January 26, 2023

–Large trade yesterday was a block of 49k buys SFRZ3/Z4 for -146.  Said to be an exit; open interest rose 880 in Z3 and fell 44294 in Z3.  The most inverted one-yr calendar remains SFRU3/U4 at -162.5 (9531.5/9694.0) up 5.5 on the day, having posted an all-time low of -177 last week. The low in Z3/Z4 last week was -152.5, yesterday’s settle was -143.5  (9565.5/9709).  When all was said and done, SOFR futures volume was just over 2.277 million and open interest net change was down 81 contracts.

–Also on SFRZ3 a new buyer of 60k 9700/9750/9800c fly for 1.5.  Need cuts of a couple of hundred bps on that one by year end.

–Yields fell slightly in treasuries with tens -1.2 bps to 3.454%.  Stellar five-year auction with 7s today.  Is there a safe harbor aspect to the treasury bid?  …given tank deliveries to Ukraine and German Foreign Minister Annalena Baerbock saying yesterday the EU is at war with Russia.  I personally am not sure whether to buy treasuries, gold, or one of these things:

https://www.theguardian.com/artanddesign/2023/jan/25/pepper-spray-school-run-apocalyptic-suv-reznavi-vengeange?utm_source=fark&utm_medium=website&utm_content=link&ICID=ref_fark

Pepper spray for the school run? The weaponised SUV set to terrify America’s streets | Design | The GuardianStyled like an Elon Musk fever dream, its great bulk sculpted with clunking facets, the Vengeance is the latest heady concoction to emerge from Irvine, California-based Rezvani Motors.www.theguardian.com

–Bank of Canada raised by 25 and may be done. Could soft PCE prices spark the same sentiment in US?  Core PCE price mom expected 0.3 with yoy 4.4%.  Today brings Jobless Claims expected 205k, and Q4 Advance GDP expected 2.6% with Price Index 3.3%. 

Posted on January 26, 2023 at 5:07 am by alexmanzara · Permalink · Leave a comment
In: Eurodollar Options

The world goes on

January 25, 2023

–Yields fell yesterday with tens down 5.5 to 3.466%.  Five yr auction today, with wi 3.565%.

–“Glitch” on NYSE caused havoc at open, with some trades canceled.  This follows the “glitch” related to air traffic control a couple of weeks ago that grounded all flights.

–Vol easing with VIX at 20, but even MSFT’s after-hours range following earnings is over 6%, from 253 in the afternoon to 237 this morning.

–A couple of tweets from yesterday:  The doomsday clock was moved to 90 seconds.  Juxtaposed with that is the oldest olive tree, in Crete, over 3000 years old.  A survivor of all the world’s hazards, misfortunes, and victories.

USA TODAY Graphics on Twitter: “The Doomsday Clock was moved to 90 seconds to midnight today, Jan. 24, the closest it’s ever been. The Doomsday Clock is a decades-long project of the Bulletin of the Atomic Scientists featuring a clock face where midnight represents Armageddon. https://t.co/uG9vmchRXK https://t.co/IFM1gmIjjT” / TwitterThe Doomsday Clock was moved to 90 seconds to midnight today, Jan. 24, the closest it’s ever been. The Doomsday Clock is a decades-long project of the Bulletin of the Atomic Scientists featuring a clock face where midnight represents Armageddon.twitter.com
Fascinating on Twitter: “The world’s oldest olive tree is over 3,000 years old, dating back to Minoan times between 1350 – 1100 BC. You can find it in Kavousi, Crete, Greece. Read more: https://t.co/XLYiF1TB5i https://t.co/QApYRZAM6X” / TwitterThis yew tree in Totteridge is about 2,000 years old & is thought to be the oldest living thing in London Trees have different lifespans For example, the blueprint for the lifespan of an oak tree is about 1,000 years The blueprint for the ‘eternal yew’ is to grow forever.twitter.com
https://twitter.com/GainesvilleCoin/status/1617924940740853760

Posted on January 25, 2023 at 5:06 am by alexmanzara · Permalink · Leave a comment
In: Eurodollar Options