September 4. Set the cat amongst the pigeons
–Aussie at new low. Nikkei at new low. Hong Kong PMI dismal at 44.4.
–Draghi was dovish yesterday and said inflation risks were to the downside. There was heavy buying of FVZ prior to the press conference, which appears to be new positioning, as total FV open interest rose by 27k. In eurodollars some of the near spreads are making new lows. For example, EDZ5/EDZ6 spread slid 3 bps to a new low of just 63. EDZ5/EDH6 is just 11.5! Ten year yield fell 2.4 to 216.7. Implied vol pounded to stupid levels. USZ atm straddle marked at just 12.6. All euro$ straddles lost 0.5 to 1.5 bps. I understand taking out the long weekend time value, but 3EU 9800 straddle (ref 9795) at just 13.5 in front of employment with another week to go seems a bit compressed. All other markets are a sea of instability, the euro$ curve is fearless.
–Late in the day a note by JPM suggested that stock market selling due to adjustments by various strategies was only half over, causing some late weakness in ESU. http://www.zerohedge.com/news/2015-09-03/jpm-head-quant-back-new-warning-only-half-selling-completed-expect-downside-price-ri
–Employment data expected 220k with rate of 5.2%. Treasury shorts are being squeezed pre-data; a soft number would “set the cat amongst the pigeons” as a friend of mine likes to say…
