Anchors Aweigh
September 16, 2021
–Inflation stories in the news are unceasing now. Here’s an interesting clip from CNBC about online sales; “Last month, Adobe found online prices grew 3.1% yoy and climbed 0.1% from the prior month. From 2015 to 2019, online prices on average fell 3.9% annually.” A huge change in trend from negative to positive. Are inflation expectations anchored? New highs in NatGas, RBOB, BBG Commodity Index. Interestingly, this is exactly the time that someone threw in the towel on the EDZ2/EDZ4 calendar that MS had recommended following the June FOMC. I believe it had traded 118 or so at that time, settled 95.5 yesterday with an exit buyer of 40k EDZ4 at 9861 to 61.5. There also appears to have been exits in the treasury curve with a FV/WN block trade flattener early ($500k DV01) and FV/UXY later in the day. Early in the day 5/30 made a new low of 105 but closed 106.6 (still a new low), and all treasury futures except WN showed declines in open interest. Seems quite strange that the plug is being pulled just as commodity prices soar. They are selling gold and selling the curve with the former down $12 this morning to $1783. I suppose there is a lot of trepidation in front of next week’s FOMC in the event of an even more hawkish dot plot. Guggenheim put out a tweet expressing the view that the new low in 5/30 is because the market is now accepting the view that inflation is transitory. I think the market is worried about the FOMC and the ridiculous dots. The head guy is telling us inflation is anchored and transitory and the minions are moving dots up. I don’t know whether it’s transitory or not. But I sure as hell am not going to short oats.
–There was a buyer of 50k 0EV 9956.25/9950 p 1×2 for 0.5. Appears to be a roll to a higher strike, and may be a protective play against the EDZ2/Z4, some of which is now just long EDZ2 which settled 9957. –Looks like it’s all over for Evergrande, but still no ripples in the market. On the other hand, Tencent in HK was 750 in February, and is now 450. Could never happen to a large US tech company, right?
–Big option expiration Friday in stocks. Today in the US, Job Claims expected 323k. Philly Fed 19 vs 19.4 last. Retail sales -0.7% m-o-m.
