Binary outcomes

May 9, 2024

–Quiet session with slightly higher yields, likely due to treasury auctions.  Current 10y rose 3 bps to 4.49%.  Auction tailed by 1 bp (4.483%). Thirties today. Late WI was 4.637%

–SOFR strip from SFRM5 to SFRM9 down 3 to 4.5.  One large option play is an add, +60k 2QM4 9656.25/9662.5cs for 0.625 (synth).  SFRM6 is underlying contract, settled 9598.5.  nearly 60 otm with 36 dte.  Also a buyer of 10k SFRU4 9700c for 1.75, settled 1.5 vs 9488.  So that’s 212 away.  On the downside the 9456.25p settled 1.5, 32 away.  On the upside, risks of massive military escalation, domestic terrorism, political dysfunction, bank failures, mass hysteria, cats sleeping with dogs.  Biblical stuff.  On the downside, Fed might hike. What’s the more comfortable short?

–Atlanta Fed’s GDP Now estimated yesterday at 4.2% for Q2.  However, a lot of data is starting to cast shade on consumer strength.  Perhaps next week’s NY Fed Q1 Household Debt and Credit report will help shed some light on the fundamentals.

NEW YORK—The Federal Reserve Bank of New York will release its Q1 2024 Household Debt and Credit Report on Tuesday, May 14 at 11:00 AM.

Posted on May 9, 2024 at 5:07 am by alexmanzara · Permalink
In: Eurodollar Options

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