Sept 25. Distract and Obfuscate
–Fed speakers today Dudley at 8:30, Evans at 12:40 and Kashkari after market hours. The first two have Q&A, so while Dudley’s prepared remarks on the workforce may not have any policy implications, perhaps he will get an interesting question. Yellen speaks tomorrow.
–The eurodollar curve flattened to a slight new low Friday, though EDZ7/EDZ8 (the front one-yr calendar) closed at a new recent high of 34.5. Given that the December FOMC in on the 13th, prior to the expiration of the December ED contract, that spread seems high relative to others. For example, FFF18/FFF19 is barely one month forward, and closed at 29. Red/gold pack spread closed at a new low of just 44.5.
–MNI reported Friday that according to new accounting guidelines by the Gov’t Accounting Standards Board that start in fiscal 2018, gov’t entities will have to record on their balance sheet the full cost of healthcare promised to public employees once they retire. No wonder R* is being marked down. If we’re going to start marking forward liabilities to market, it’s got a chance to get “HEY…did you see the big NEW CONTROVERSY on NFL players kneeling during the anthem?” Yeah, let’s talk about that instead.
–Buyer of 50k EDM8 9825/9812p spd Friday for just under 4.0. Settled 4.0 vs 9831.5. Looks like an adjustment trade on some old butterflies. Taken on its own, it suggests two hikes prior to the June expiration for the top strike to go in the money. June FOMC is 13 June, EDM8 expires on 18 June.
