Aug 10. Freefallin’

–The Turkish Lira is in freefall this morning (TRY 6.26 high), and yuan is also weaker at 6.85.  USD stronger across the board with DXY breaking out to new highs for the year.  US equities had a weak close and are currently under pressure with ESU -15 at 2838.75.  It looks to be a “risk-off” end to the week with european banks also getting slammed, for example the Italian bank index (IT8300) is down 2.1% this morning, at the bottom end of the past two month range.
–Big trade yesterday was an exit sale of 120k TYU 120/122 call spread at 12 to 11.  Settled at 11, ref 119-23.  Open interest fell by 95.4k and 84.5k.  There’s more left in this trade, as the 120 calls, (which are at the money this morning) still have 241k open.  Sept treasury options expire two weeks from today.  There was little in the way of concession for this week’s huge refunding; all selling is absorbed with a bid to follow.
–Relentless bid in EDU8 with a settle of 9761 yesterday, just 6.6 bps below the settlement of EDM18, but with a 25 bp hike fully expected.  Oct Fed funds are cemented at 9785.5 or 2.145%, with the Fed effective 1.91%. Previously, the market would have had some concerns about funding pressures, given bank weakness associated with TRY, and vulnerability in other emerging mkt fx.  In the current environment, the central banks ‘have our backs’.  Right? (crickets).  All the same, EDU8 9762.5p at 3.25 bps and EDU8 9750 puts which traded small at 0.25 yesterday seem to be on the cheap side. [THIS IS NOT A RECOMMENDATION-but I sure wouldn’t sell these puts].
–August midcurves expire today.  Yesterday I mentioned 3EQ 9700 straddle which was 3.0/3.5 ref 9699.5.  Settled 3.5, but futures this morning are 9704.0 with a full day ahead.
–CPI expected +0.2 with 2.9 yoy.  Core yoy expected 2.3%
–Below is a chart which indicates divergence between oil and emerging mkt currencies.  Stronger USD should act as a weight on all commodities…
–Interesting article on the promise of block-chain, not just in terms of crypto-ccy, but in terms of paperwork simplification.  Maersk, the shipping giant, has created a block-chain platform for shipping documents.
Posted on August 10, 2018 at 5:26 am by alexmanzara · Permalink
In: Eurodollar Options

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