July 25. Market continues to place bets on tightening onset for Q2
–Ten year yield climbed 4.5 bps yesterday to just above 2 1/2%, as Jobless Claims fell below 300k (284k). Trade continues to be focused on EDM5 puts as the market places bets on Fed tightening in the first half of next year. Once again, EDM5 9950/9925p 1×2 were heavily bought, for 1.0. However, late in the day there was covered buying of 9912 puts as well (5.75s vs 9942). According to prelim sheets open interest in EDM5 options rose another 32k to 1.175m.
–August treasury options expire today. There was a buyer of about 50k TYQ 125.5c for 1 late yesterday. Appears to have been an exit.
–Against the backdrop of new highs in the SP’s, AMZN released earnings showing an operating loss of $15m. “The thing that really stands out is operating loss guidance for next quarter of between $410 million and $810 million, compared to just $25 million a year ago.” (BI). Real estate sites Zillow and Trulia may combine…”Neither company is currently profitable on an annual basis.” (BBG). Seems to be a pretty forgiving environment for unprofitable ventures (I don’t know what I’m doing wrong…), though AMZN down 10% after hours.
–Besides the EDM5 put activity, there are some signs of life in terms of implied vol. There was a new buyer yesterday of about 7k TYU 125^ for 1’12 to 1’13. I marked vol up 2/10’s to 4.3.
–Durable Goods today expected +0.5.
