August 4. Duration wanted

–Payrolls expected 180k and avg hourly earnings 0.3%, with a rate of 4.3.  Yields fell once again yesterday as vol and the USD declined.  Late in the day $/yen was below 110 having been as high as 114.50 in mid July and mid May.  Once again there was early large buying of WN and TY.  Open interest wasn’t up much in TY at +6.4k, but in the ultra bond it rose 15.6k.  Someone wants long duration.  Open interest in the ultra bond exceeds that of the classic USU contract by over 12%.  Ultra has 844k open. 2/10 edged to a slight new low just under 89 bps.
–AMZN’s Job Fair with gargantuan lines suggests that the ‘full employment’ environment suggested by official data is somewhat suspect.

–Once again vol selling was in evidence:  TYX 126^ at 1’56, TYU 126.25^ opened 57/8 and closed 56/7.  The straddle for unemployment (week 1 August) was the lowest ever on the day before, trading 21/64’s…though prior to the close it popped up to 24 on a buyer of 25k week-1 126.5c for 6 covered 126-08+ to 10.
–Late news that Mueller was intensifying the Russian probe with a grand jury suggests there could be a surprise in August.  However, I already have seen ‘analysts’ saying that stocks would weather the storm and ultimately it would be beneficial for stocks if Trump were bounced.
–Jan Fed Funds were 9874.5/75.0 late in the day, and F8/F9 closed at 22.5, as odds of tightening are slowly squeezed out.  At a price of 74.5 in FFF8, the odds of a hike before year end are below 40%.  Not much next week besides supply and PPI/CPI Thursday and Friday.

 

Posted on August 4, 2017 at 5:21 am by alexmanzara · Permalink
In: Eurodollar Options

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