April 11. Sustaining interest…it’s not easy

–When the Fed hiked on Dec 14th EDZ7 settled 9843.0.  The next day it settled 9838.5.  The lowest this contract has settled is 9835.  When the Fed hiked on March 15, EDZ7 settled 9841.0.  It now trades 9849.0.  I guess for the next hike it should settle around 9839?  Think back to Dudley’s ‘financial conditions’ speech a couple of weeks ago…moving FF is not changing conditions.  The NY Times this morning has a story, Yellen Signals Shift from Stimulating Economy to Sustaining Growth.  I suppose that’s a good summary of her comments; I’m not sure.  I started to watch, but as soon as she began to speak it was like an old Batman episode, where sleeping gas sprays out of the TV.  I think I heard her lament about low productivity as I was snoring, but that’s about it.

–Back to the December contract.  According to prelim open interest, EDZ7 added 104.5k positions to become the largest open interest contract at 1.64m.  There was huge buying of EDZ7/EDH8 spreads for 9-9.5; the spread settled 9.5 and open interest in March actually fell 20k.  I would also note that the Z7 buying caused considerable pain to those long the EDU7/Z7/H8 fly which settled on the low at -1.0.  This fly looks like a screaming buy, but it also looked that way to me at +1.0, +0.5, 0.0, etc.

–Today we get NFIB small biz optimism.  This data soared higher after the election and has maintained its strength even as market based measures (like euro$ calendar spreads) have retraced the election euphoria.  It’s expected 104.8, but I think risk is to the downside.  Ten year auction also occurs today, with the ten year yield having slipped 1 bp yesterday to 236.  I would finally note that I marked the ten year note/tip spread at a new recent low of 193.5….can’t even maintain 2%.

–Kashkari also speaks today.  There are unsubstantiated rumors that he may talk about TBTF banks.  Better strap in for that one….

Posted on April 11, 2017 at 5:29 am by alexmanzara · Permalink
In: Eurodollar Options

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