Another planet

February 19, 2021

–I watched two very different live-streams of the US government at work yesterday, the Financial Committee hearings on Gamestop and NASA’s successful landing of the Perseverance rover on Mars (with the Ingenuity helicopter).  Could there possibly be a starker contrast?  Everyone at NASA talks about the success of the team and joint efforts over long periods of time on incredibly complex problems.  Vote NASA.

–Examples of price pressure continue.  Prices paid in the Philly Fed report jumped to 54.4 from 45.4 in Jan and 24.9 in Dec.  Cass Transportation had this to say about their latest data: “Once again in Jan, our data tells a story of rising freight costs, showing the fastest rate of acceleration since 2009-2011, with the exception of a few months in late 2018.”

–Yesterday the only contract to close in the red on the eurodollar curve was EDH’23 at 99.655, down 0.5 on the day.  The curve flattened, with blues (4th year) up 3.125 and golds (5th) up 3.5.  The ten year yield eased slightly to 128.5; vol oozed out across the curve.  Back to EDH3: it was easily the most heavily traded contract at 332k, the adjacent EDZ2 traded 300k, while the next closest only traded a bit over 200k.  Open interest on EDH3 (prelim) was up 58k.  Obviously, this is new selling, but of course it may be against something else.  However, as I mentioned over the weekend, EDZ2 at 9970 (settled at 69) is an outright sale at ~ 10 bps above the current libor setting.  The same goes for EDH3; at yesterday’s settle of 9965.5 or 34.5 bps, it’s about 16 higher than yesterday’s libor setting, and is over TWO YEARS away, in the face of inflation pressures and an economy that has the possibility of roaring back like a kitty.  I would say it’s an asymmetric bet!  Afraid of a blow-up that sends yields negative?  Yesterday someone traded the EDH3 9950/9900ps which settled 7. 

these are the people I want working in the gov’t   (ashtrays and cans of Royal Crown Cola on the desks!)  (lead engineer on Ingenuity helicopter)

Posted on February 19, 2021 at 5:51 am by alexmanzara · Permalink
In: Eurodollar Options

Leave a Reply