Aug 29. Excuse me stewardess, is there a movie on this flight?

–Once again the curve flattened with marginal new lows in 2/10 at just over 183, and 5/30 at 144, both down around 1.5 bp on the day.  Same with red/gold euro$ pack spread at 190.75, which fell 1.125.  As the back end of the treasury market presses higher in price, straddle premiums expand.  For example, with the Dec bond up 18/32’s, the Dec 140 straddle went from 414 to 422.  TYZ 125.5 straddle was 209 on Wednesday and the 126 line settled 214 yesterday.  Similarly, Blue June 9712.5 straddle went from 65.5 to 67.0.
–There has been heavy put buying in Blue Oct puts this week, yesterday +15k 3EV 9700p for 3.5 (settled 3.25 ref 9731.0), and 12k Gold Oct 9662p which settled 2.0 ref 9699.   Next week we have ECB and Employment data, either of which could steepen the curve.  The Sept FOMC is on the 17th, so perhaps the market will finally react to the bearish projections of the dots as pertaining to the back end of the curve.  Or maybe the buyer just “doesn’t have a strategy” besides hope.
–Going into a long weekend with significant tensions, one would think that treasuries will maintain a bid.  Washington Times reports increased terror chatter as another 9/11 anniversary approaches.  However, the market trades a bit long already.
–CBS News: “A man who had an ISIS flag waving from his vehicle is facing several charges after he threatened police with a bomb Wednesday morning when he was pulled over on the Southwest Side [of Chicago].  What are the odds that he trips and injures himself in jail?

Posted on August 29, 2014 at 5:12 am by alexmanzara · Permalink
In: Eurodollar Options

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