August 24. Jackson Hole

–New low again in 2/10 treasury spread which was printing 21 at the futures close, and 20.25 at the time of the equity close.  Dallas Fed president Kaplan was on CNBC and said that the flat curve at the long end reflects market expectations of sluggish future growth.  In the same interview with Steve Liesman, he mentioned that household debt metrics were much better than they had been several years ago, thus supporting an outlook for improved consumer spending.  However, he also mentioned demographics as a headwind in terms of future growth.  For some reason it made me think of Duesenberry’s life cycle of consumption: older people don’t spend as much.  “…slaves of some defunct economist.”
–In terms of being a slave to central bankers, Powell speaks at Jackson Hole this morning.  Important?  Maybe, but the expiring TYU 120.5 straddle settled at 14 yesterday, 7 32’s on either side of strike for breakeven.  Yawn.   Libor/ois spreads also posting new lows.  EDZ8 to FFF9 settled at 27, the lowest since January.   The market expects Powell to stick to the program of gradual rate increases and policy normalization, though there could be a hint of an end to the balance sheet taper.
–Brazil real sank to a new low yesterday.  Emerging market currencies continue to represent a risk. News reports this morning indicate that little progress was made in China/US trade talks.  

Posted on August 24, 2018 at 5:10 am by alexmanzara · Permalink
In: Eurodollar Options

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