Aug 4. Friday summary

Interest rate futures exploded higher after the employment report, apparently due to the average hourly earnings number of 0.0%.  The thought seems to be that Yellen will be very hesitant to pull the trigger on raising rates unless wage growth is on much firmer footing.
–The ten year yield fell 5.6 bps to 250.3; tens seem quite comfortable bouncing around 2 1/2%.  The five year note plunged over 9 bps in yield to 167.  On the dollar curve, the green pack outperformed, up nearly 10 bps to average price of 9780.5 or just under 219.5 yield.  The curve steepened with 5/30 up 7.3 to 162.4.  Red/gold eurodollar pack was up 2 to just over 207.  Green/gold was up 3.5 to just over 104.  So red/green, 2nd the 3rd year spread is 103 and 3rd to 5th (green/gold) is the same level.
–After Friday’s data, EDH5/6/7 futures butterfly traded as low as -18, before immediately bouncing back to -10 and settling at -12.  The huge seller from Thursday at 0.0 to -3.5 covered the short.  Open interest in EDH5 was -10k, in H6 -38k and H7 -18k.
–Stocks closed modestly lower but the high yield ETFs continued their plunge (HYG 5.62 yield and JNK 5.76 yield).
–As mentioned Friday, both Dec Corn and Nov Beans made new lows, off the highs of May by 29% and 17% respectively.  Sept Crude Oil is below $98/bbl, having been as high as 106 in June.
–Implied vol was hit.  TYU atm straddle went from 1’05 Thursday to 0’60 settle Friday.

Posted on August 4, 2014 at 5:10 am by alexmanzara · Permalink
In: Eurodollar Options

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