Archive for the ‘Eurodollar Options’ Category

Short end yields jump

December 6, 2022   –Large jump in short end rates Monday as ISM Services rose to 56.5 vs expected 53.5.  WSJ ran a Timiraos article that suggested the Fed could raise rates above the market’s 5% terminal expectation.  March’24 weakest ED and SOFR contracts, down 17 bps (9568.5 and 9594.5) Lowest contract on SOFR strip […]

Posted on December 6, 2022 at 4:52 am by alexmanzara · Permalink · Leave a comment
In: Eurodollar Options

Fighting the last war

December 5, 2022 –NFP much stronger than expected 263k. with yoy Avg Hourly Earnings +5.1%.  That’s what the Fed is fighting against, so rates jumped, but only short end rates remained higher by the end of the day as higher funding costs will stifle future economic activity.  The weakest contract on the SOFR strip was […]

Posted on December 5, 2022 at 5:25 am by alexmanzara · Permalink · Leave a comment
In: Eurodollar Options

SFRZ4

December 4, 2022 – Weekly Comment The chart is SFRZ’24, the three-month future, two years forward.  On November 4, the settle was 9602.5.  On Friday, December 2, the settle was exactly 100 bps higher, 9702.5, a rate below 3% (2.975).  When looking at the low to high prints, the range is wider: 9587.5 on Nov […]

Posted on December 4, 2022 at 12:12 pm by alexmanzara · Permalink · Leave a comment
In: Eurodollar Options

Conditions are easing

December 2, 2022 –Yields continued to plummet in front of today’s payroll data.  NFP expected 200k from 261k last, with a rate of 3.7%.  YOY Avg Hourly Earnings expected 4.6% from 4.7% last. 10y yield -17 bps to 3.528% while green and blue ED/SFR were +16.375. –PCE inflation numbers yesterday were about as expected, headline […]

Posted on December 2, 2022 at 5:13 am by alexmanzara · Permalink · Leave a comment
In: Eurodollar Options

Softened tone

December 1, 2022 –Powell emphasized that rate hikes would slow, but did NOT stress that the Fed would be keeping rates high for a long time.  The market seems to have concluded that the commitment to “keep at it until the job is done” was watered down.  Huge rally ensued with reds (2nd year) up 15.375 […]

Posted on December 1, 2022 at 5:56 am by alexmanzara · Permalink · Leave a comment
In: Eurodollar Options

High for longer

November 30, 2022 –Today’s news includes ADP expected 200k.  GDP 2.8% from 2.6%.  JOLTS and Beige Book.  MAIN EVENT: Powell speaks 1:30 EST.  Jackson Hole was just three months ago.  Since then there has been 150 bps of hiking with another 50 priced for December.  Core message likely to be that rates will stay relatively […]

Posted on November 30, 2022 at 4:59 am by alexmanzara · Permalink · Leave a comment
In: Eurodollar Options

4.5 to 4.75%

November 29, 2022 –Large buyer >60k EDZ2 9512.5/9531.25 cs 2.5 up to 3.0.  Settled 3.0 (3.5/0.5) ref 9506.25.  SFRZ2/EDZ2 has collapsed since the start of the month, from 52.5 down to 36.5 at Monday settle.  So turn-of-year pressure has been alleviated (extra liquidity reaching the markets?).  Three month libor currently 4.73486 (9526.5) with 16 days […]

Posted on November 29, 2022 at 5:04 am by alexmanzara · Permalink · Leave a comment
In: Eurodollar Options

China is a wildcard

November 28, 2022 –Protests in China are a wildcard, with risks to both supply chains and global growth (the latter indicated by CLF3, below $74/bbl this morning, -2.32).  The NY Fed puts out a supply chain pressure index; pressures have been easing.  https://www.newyorkfed.org/research/policy/gscpi#/interactive From the last report, “…pressures increased moderately in October after five consecutive […]

Posted on November 28, 2022 at 5:25 am by alexmanzara · Permalink · Leave a comment
In: Eurodollar Options

Inversion accentuated

November 27, 2022- weekly comment Last week I highlighted two market themes.  First, was buying of otm call spreads in SFRU3, namely the 9700/9800 call spread for 4.25 to 4.5.  This week that ripple turned into a small wave with significant buying of Z3 and H4 call spreads in SOFR.  The other feature I noted […]

Posted on November 27, 2022 at 7:16 am by alexmanzara · Permalink · Leave a comment
In: Eurodollar Options

Vol bid in treasuries, lower VIX, as curve inverts to new lows

November 26, 2022 –Wednesday was the tenth day in a row that 2/10 ended lower.  It closed just under 77 having printed as low as -80.  On Nov 9, I marked 2/10 at -47.7 while BBG has -49.3.  In any case it’s a drop of around 30 bps in two weeks.   Dec 14 FOMC is […]

Posted on November 25, 2022 at 5:49 am by alexmanzara · Permalink · Leave a comment
In: Eurodollar Options