Archive for the ‘Eurodollar Options’ Category
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 […]
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 […]
They say don’t fight the Fed
November 23, 2022 –They say don’t fight the Fed, and they’re not, at least at the very front end. SFRH3 was -2.5 to 9497.5 yesterday or 5.025% in front of this afternoon’s Fed minutes. FFF3 settled 9561.5, down 1.0. Current Fed Effective is 383, so a 50 bp hike would take EFFR to 433 or […]
Just missed it
November 22, 2022 –Early action featured sizable call spread buying in SOFR, following Friday’s purchase of SFRU2 9700/9800cs for 4.25 to 4.5. Yesterday, +8k SFRM3 9600/9650cs. appears exit, settled 4.0 ref 9495.0. +10k SFRU3 9600/9700cs, looks new, settled 11.0 vs 9511.0. +40k SFRZ3 9700/9800cs, new, settled 8.0 ref 9540.5. +30k SFRH4 9700/9800cs, new, settled 14.75 […]
Twos and Fives today
November 21, 2022 –Light volume Monday though red euro$ pack was -9.0 and greens were -9.375, with blues and golds -7.75 and -7.25. Red/gold pack spread hit a new inversion low of -75.375. 2/10 was -69.4 at futures settle, also a new low for the cycle. Ten-year yield to inflation-indexed breakeven made a new recent […]
Using the 2018/2019 Playbook
November 20, 2022 – Weekly Comment ******************************************* On Friday, there was a buyer of about 50k SFRU3 9700/9800 call spreads for 4.25 to 4.5 (settled 4.0 ref SFRU3 9615.5). Current EFFR is 383 bps. SOFRRATE is 378 to 381. January 23 Fed Funds settled 9562.5 or 437.5 bps, which is 54.5 above EFFR, indicating high […]
But I don’t even really work here…
November 18, 2022 –Worst Philly Fed number of the year at -19.4. Bullard set the tone early by saying FF should go to 5.0-5.25% and Kashkari capped the day by saying the Fed shouldn’t stop until inflation has peaked. New low in red/green ED pack spread -73.25 (spread is same level in SOFR). New low […]
Historic new lows in stir spreads
November 17, 2022 –Historic lows in a lot of STIR calendars. Example on attached chart is red/green euro$ pack spread at -69. In 2007 that spread barely went negative, at a time of true crisis. Currently the unemployment rate is near all-time lows, and the consumer seems to be “hanging in there…though pulling back” according […]
Broader implications?
November 16, 2022 –Implosion in near one-year calendars in short end curves. For example, EDM3/EDM4 closed -126.5, (9481.5/9608) down 11.5 on the day as 2024 contracts rallied around 15 bps. In SOFR, SFRM3 is the lowest contract on the strip at 9513.5, which implies a FF target of 4.75 to 5%. By contrast SFRM4 is […]
PPI today
November 15, 2022 –A few interesting things on the day: 1) Ten yr breakeven 237.5…new recent low (since mid-Oct) although the low in late Sept was 216. 2) Vol quite a bit firmer in TY /treasuries. Not only was there no weekend decay, straddle levels nominally higher. Buying of TYF 112.5 and 113 calls covered […]
