Aug 20. Edging higher

–USD slightly higher this morning, as are metals, as are stocks.  TRY weakening after Friday’s downgrade, but Venezuela’s 95% devaluation a sign of things to come.  Big event of the week will be Powell’s speech at Jackson Hole on Friday.  Fed minutes released on Wednesday afternoon.  Bostic comments today with Q&A.
–Yields essentially unchanged Friday, though there were a few large call buys.  0EU 9712c 4.0 paid 30k covered 9708.  Late in the day there was a buyer of 10k TYU 120.5/121.5cs for 7 covered 120-09 with 28d.  Sept treasury options expire Friday.  In futures, the treasury rolls haven’t really begun, but it’s worth noting that the TY roll has moved from 7/32’s to 4/32’s since the start of the month.  With a large speculative short, it follows that asset managers are long, and several analysts have issued bearish outlooks for the ten year roll (asset managers roll early).  However, Gundlach’s tweet on Friday that the large spec short positions could lead to a squeeze make me think it’s reasonable for the roll to find support right here, even though there’s a 2% tail to Dec.
–Reds to blues on the dollar curve at slight new low Friday, closing -2.5, (-0.375 on the day).  The ED curve continues to project economic stagnation towards the end of next year.
Posted on August 20, 2018 at 5:17 am by alexmanzara · Permalink
In: Eurodollar Options

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