Aug 2. Yields ease

–Yields dropped yesterday, in part due to weak auto sales, with 10s down 4.1 bps to 225. Many euro$ calendar spreads made new lows, for example EDZ7/EDZ8 closed at 27.0, -1.5 on the day. Red/green ED pack spread closed at exactly 20, -1.875. EDH8/EDM8 settled 5.5, lowest since last November. FFF8/FFF9 settled 23.5, less than 1 hike priced for next year. And at a close of 9874 in FFF8, the odds for another hike this year are only around 40%.

–While yields eased, implied vol remained bid on heavy put buying. TY week 2 (Aug 11 expiry) 125/124.5ps was bought for 2 in size of 45k. Settled 1 ref 126-075. TYU 125.25p gained 23.7k in open interest on new buying; settled 11. TYU7 126.25 straddle settled 63 (same as atm on Friday). TY2Q 125/127 strangle settled 8.

–There was a large early buyer of 25k 2EZ 9850c for 2.5 which was a close, as OI fell 17k.

–Keeping an eye on 2EH/3EH straddle spread as 2021 is the libor end period. 2EH 9800^ 41.0s vs 9804 EDH20, and 3EH 9787^ 45.5s vs 9785 in EDH21. Might expect this spread to widen slightly.

–EUR at a new high this morning 118.40, and CLU7 is up just slightly after yesterday’s outside day and close -1.01 at 49.16. AAPL’s results have given a boost to Nasdaq, but ESU only modestly higher.
–ADP today expected 173k.

Posted on August 2, 2017 at 5:19 am by alexmanzara · Permalink
In: Eurodollar Options

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