Aug 30. Core PCE, the Fed’s preferred inflation measure, vs EM

–Rates barely changed as stocks powered to new highs on Wednesday and the treasury wrapped up the 7 year auction.  Tens unch’d at 288.2. The curve flattened somewhat as it tends to do at the end of the month.  5/30 spread closed at 24.0, a new monthly low.  Red/gold pack spread also eked out a new low, at just under -1 bp.  Though there is little sign of stress on US markets, the Argentinian peso was crushed, and Indian rupee also made a new low, with weakness across other currencies as well (continuing this morning).  It’s worth looking at 5y CDS, with   Argentina exploding to 655 at the end of the day.  Brazil at 295 bps, Italy 256 and Turkey 504.  Italy btp to  bund spread ended the day at 272 bps.
–Put selling prevalent in eurodollars, for example, EDZ9 9675/9775 rr cov 9699, ppr sell 30k at 7.5, sold put on exit.  Another 35k EDV8 9737.5p sold at 4.5 to 4.75 (Oct expiry on EDZ8), new position.  EDZ8  9737^ settled at the blue light special of just 13.5 bps.
–Oil has had a good bounce off the recent low, with CLV closing yesterday +98 at 6951, near the upper end of the range since May.  However, copper and EM stuff looks like the rally has run out of steam.  This morning, CNY weaker, Shanghai Comp -1.1%, Russian ruble and Turkish lira both down, with brand new lows in India rupee and Indonesia rupiah.  There’s been early profit taking in US stocks.
–US domestic news is perhaps fading in importance, but today we get Jobless Claims and Personal Income and Spending, expected +0.3 and +0.4.  PCE prices yoy expected 2.2% with the Core measure right at the Fed’s target, +2.0%.
Posted on August 30, 2018 at 5:14 am by alexmanzara · Permalink
In: Eurodollar Options

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