Feb 19. US rates dropping as commodities rally
–Solid rally in interest rate futures yesterday, with ten year yield down 3.5 to 2.71. Early yesterday there was size buying of Apr, May and June 127.5 calls, all new positions, OI +36, +18 and +20k (Ten yr yield equivalent at strike approx 2.30). Further gains this morning. Stocks were up marginally as well, but the truly explosive rally is in the CRB index and Crude Oil. CLJ rose about $2/bbl to close above 102. Most grains appear to have put in bottoms. Gold has been pushing higher and silver jumped $1.50 in the past two days to hit $22. The multi-month rally in Oats should have been a big tip-off, right?
–While some EM currencies have stabilized recently, stocks in Brazil (Bovespa) tanked 2% yesterday and are close to testing last July’s EM panic low (which was the lowest in four years at 44000).
–In spite of the commodity rally, the 4th and 5th eurodollar contracts are near their highest levels ever. EDZ4 9968.5 and H5 9959.5 vs highs of 9971 and 9966.5.
–Besides the call buying noted above, there was mostly premium selling in tens. June 124.5 straddle sold from 2’23 to 2’21 where it settled, down to 4.6 vol. May straddle and April strangles also sold.
–Huge size traded in Green June midcurves, for the most part directionally positive. New position -40k 2EM 9800 put vs +2EM 9862/9875 call spd. Large seller of 40k 9825/9875 strangle from 20.5 to 20. Exit seller of 20k 9837/9812ps at 6.0. Green June 9850 straddle settled 42.5 Friday and 40.5 yesterday, though probably could have bought 40’s.
–News today includes PPI expected +0.2 and Housing Starts 950k. FOMC minutes.
From prelim open interest sheets:
2EM 9875c +57k
2EM 9862c +45k
2EM 9800p +42k
2EM 9812p -18k
2EM 9837p -23k
TYJ 127.5c +36k
TYK 127.5c +18k
TYM 127.5c +20k
