June 13. Friday the 13th
–Crazy late day action provides a reminder of our elusive friend, volatility. About 10 minutes after the floor close huge buying came into the front pack (approx 40k) and red pack (20k), catching the market completely by surprise. Then BOE’s Carney suggested rates might rise sooner than markets expect. As example, consider EDM6. Late in the da there was a seller of at least 20k Green July 9850p at 2.0 with futures trading 9848.5. The 9850 straddle was quoted 3.0/3.5 with one day to go (expires today). The contract traded to 9851.5 on late buying of reds, but then ultimately traded to 9840 last night on Carney’s hint of tightening.
–Carney’s comments provide further fuel for flattening trend in US. The 30 year bond auction had already provided evidence of strong demand at the long end, coming in at 3.444 vs w/i just prior to auction of 3.465. 5/30 settled at recent low of 176, but should challenge the early May low of 170, with FVU -7 and USU +8 this morning.
–The disintegration of Iraq caused crude to surge, up 250 late to 106.90/bbl. I think events in the mideast are an extraordinarily negative development, but for now US markets appear to emphasize local concerns.
–A couple of other notes, copper was down 2.50 to settle 301.70, again testing 3.00. EURJPY posted new low under 138. Low of year has been 136.23 on Feb 14.
–PPI today expected +0.1.
