August 21. “Funny how?”

–Global stock markets the world over tumbled as one of the world’s keenest financial strategists, Alexis Tsipras, resigned.  Well, maybe it wasn’t exactly for that reason, but US indices fell over 2%, as weak equity market action dominated yesterday’s trade.  With China’s dismal Caixin/Markit Mfg PMI of just 47.1, the lowest since 2009, ESU fell another 20 handles last night but has come back to slightly positive as of this writing.  Funny, but a lot of markets are getting to levels not seen since bottoms in the heart of the crisis in 2009.  (“Funny how?)  Perhaps the dislocations that led up to the “great recession” were never really resolved but simply misplaced, and are percolating up here and there once again.
–New lows again in many EM currencies.  Dow Jones Composite made a new low for the year, unlike SPX and Nasdaq.  The ten year yield fell 4.6 bps yesterday to 208, again gravitating to halfway back of the year’s range, from 164 in January to 248.5 in June.  Overall activity in interest rates was subdued with implied vol essentially unchanged (though higher in USU).  On previous bouts of financial angst ten year vol had jumped up to 6.3 or so, now mired at 5.4.  VIX, on the other hand, leapt 3.9 yesterday to 19.14.
–The curve flattened with a new low in red/green euro$ pack spread to 54.5, -1.5 on the day.  2/10 treasury spread also made a new low of 141, plunging 6.3 on the day.  Junk spreads are making new highs.  Interesting to note that HYG and JNK (hi yld etfs) are at new lows, and testing levels last seen in late 2011, though no where near the 2009 carnage.
–September treasury options expire today, along with August equity options.

Posted on August 21, 2015 at 5:24 am by alexmanzara · Permalink
In: Eurodollar Options

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