Bulls and bears

June 3, 2021

–Bull market: hacking for ransom.  Bear market: NFTs.  On the first topic, the FT has a headline, ‘Biden to rebuke Putin over hack of meat processor JBS.’  Oh good, I feel better now.  On the second, I provide the link below with this interesting quote, “The NFT market has imploded over the past month, with sales in every single category almost entirely drying up.”
Perhaps the hackers are becoming a bit more discriminatory with regards to spending their ransoms. Maybe now they are prudently accumulating Soybean Oil (new highs).  Or maybe global liquidity is drying up around the edges.  ZH reports that the Fed intends to wind down the Secondary Market Corporate Credit Facility, or SMCCF, which “holds about $13.7 billion in already outstanding corporate bonds.”  Given that the Fed is buying $120B in treasuries and MBS per month, shedding $13.7B into a frothy market should be a snap, and I am sure it will be.  But even this change at the far margin is a symbol (finally) of some restraint out of the central bank.

–The ten year sees the 1.60% yield as a magnet, falling 2.4 bps yesterday to 1.591%.  However, option trades in dollars were slanted to the downside (for higher yields).  For example, a new buyer of 20k 2EZ 9900/9875/9862/9837 p condors for 4.75.  Max profit on this trade occurs at expiration if EDZ3, which settled 99.055, is between the middle two strikes, i.e below 9875 and above 9862.5.  That would be consistent with a FF target of 1.0 to 1.25% by December of 2023, but the options expire at the end of this year.  

–This morning there is a buyer of 2EZ 9900/9887ps vs selling 9925/9937cs, paying 0.5 for 17k.  This trade makes a max of 12 bps below the bottom strike of 9887.5. (thanks NovaSatus Trading and Pricing Monkey).  Same idea as the condor above. 
While there have been a lot of put buyers further out the curve in blues and golds, these trades are moving the idea for potential hikes closer in time.

–ADP and Jobless Claims today expected 650k and 387k respectively.  ISM Services 63.1.  Yesterday 3-month libor finally edged a touch higher at 13.4 bps, but BSBY3m, the BBG bank funding index, sank to a new low of 8.805 bps.  No signs of reduced liquidity there.  In fact, EDM1/EDU1 three month calendar spread settled negative 0.5, a new recent low.

Posted on June 3, 2021 at 5:04 am by alexmanzara · Permalink
In: Eurodollar Options

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