Dec 22. High yield ETFs are flat for the year…
–Quiet day in fixed income though the curve edged flatter and premium was bid. On a day where futures prices were close to unchanged, deferred midcurve straddles gained 1-1.5 bps. Perhaps after the recent thrashing no one wants to be overly short vol going into the holiday weekend.
–New highs in near euro$ calendars. For example, the peak one-year spread is EDH8/EDH9 which closed +1.0 at 43 bps. In Fed Funds, Jan18/Jan19 settled 51.5, so over 2 hikes for next year…
–Bitcoin: we heard a trade of $1mio premium paid for $50000 call strike price, Dec 2018 expiry for 275 bitcoin.
I divided $1mio by 275 and get just over $3600 per call. I used an underlying price of 16000, and an expiry date of 12/17/2018 and get implied vol around 135%. If using an underlying of 17000, then implied is 129%. I am not certain if that’s correct, but I will say that VIX is around 9.6 and VXN 12.6, so we’re talking at least 10x higher, which I suppose makes sense in the context of a market that has just fallen 30% from its peak and is still up over 10x on the year.
–Another thing to mention is that high yield etf’s gapped lower yesterday. Both HYG and JNK are essentially where they started the year. This is something to watch; widening spreads mean higher vol. What the federal gov’t gives in the form of tax relief, the credit markets can remove in the form of more stringent lending standards. It’s the debt, stupid.
–News today includes Personal Income and Spending expected +0.4 and +0.5. Core PCE prices expected +0.1 and yoy expected 1.5 from 1.4. This is the Fed’s preferred measure of inflation. A high this year of 1.9 in January, and a low of 1.3 in August. Also released is Durables expected 2.0, New Home Sales 655k.
–Happy holiday weekend! Alex Manzara
