A bad first half

June 30, 2022

–Stocks on their back foot this morning to end the quarter, with ESU -50.25 at 3771.0 (down around 17% on the qtr).  Yesterday I mentioned that the Fed’s preferred measure of inflation, PCE prices, was coming out Friday…actually today.   PCE inflation yoy expected 6.4% from 6.3 last, Core 4.8% vs 4.9% last.  Jobless claims expected 225k.  Chgo PMI 58 from 60.3.

–Attached is a chart of SFRH3/SFRH4 at a new low -61.  EDH3/EDH4 settled at a new low of -62 and is the lowest 1yr calendar on the ED strip, down 14.5 on the day!  Central banker emphasis on fighting inflation is keeping near contracts under pressure, but the short end indicates that the economy is going to look sickly by the second half of next year.  With eases being priced for next year, the spread between reds and deferred contracts is steepening.  ED pack changes at settle: Whites +0.375, reds +14, greens +16, blues +11.125, golds +9.  Red/gold pack spread settled at a new recent high -4.75.   Futures settles for December contracts: EDZ2 9617 or 3.83% (cheapest on the strip).  EDZ3 9670 or 3.30%, EDZ4 9696.5 or 3.035%, EDZ5 9692.5 or 3.075% and EDZ6 9683.5% or 3.165%.  Most straddles fell by a few bps, though absolute levels are still historically high. 

–Buyer on exit yesterday of 50k EDZ2 9650/9600ps for 26.0 covered 9617.5.  Settled 26 vs 17.0, OI down 30k in both strikes.  There continues to be buying in TYQ 114/113ps, yesterday about 15k with OI now 53k and 35k.  Settled 4/64 vs 117-165.  To give a sense of vol, there was a block seller of 7500 USU 137p at 3’03 vs 136-24 or 5’54 in the straddle.  The straddle settled 5’56, but yesterday the atm 135^ was 6’06.  

Posted on June 30, 2022 at 5:50 am by alexmanzara · Permalink
In: Eurodollar Options

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