Archive for the ‘Eurodollar Options’ Category
June/Sept positive, or head of cabbage?
Dec 8, 2022 –Strong bid for treasuries and vol on Wednesday. Treasury yields across the curve were down by 10 or more with tens -10.7 to 3.404%. On Tuesday I noted the atm TYF 114.25 straddle settled 1’53; yesterday the atm TYF3 115.25 ^ settled 1’56. FOMC is next Wednesday, keeping relative pressure on the […]
Risk assets at risk
December 7, 2022 –Tuesday featured a more inverted curve as buying in long treasuries was spurred by equity and energy weakness. SPX down 1.4%, Nasdaq -2% and CLF3 settled 74.25, down 2.68 and is lower this morning. The two year note fell 4 bps to 4.35%, while tens fell 8.5 to 3.511% and thirties down […]
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 […]
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 […]
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 […]
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 […]
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 […]
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 […]
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 […]
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 […]
