Archive for the ‘Eurodollar Options’ Category
Monetary policy operates with a lag
July 18, 2022 –It takes six months to a year for monetary policy to take effect. The Fed’s first rate hike was in March, just four months ago. How do you know, as a central banker, if you’ve done too much? It’s probably when the yield curve has inverted to new lows. 2/10 ended the […]
Front end trashed
July 14, 2022 –Huge plunge in near contracts as the market assesses odds for a 100 bp move at the July FOMC in the wake of 9.1% CPI. FFQ2 ended 9750, down 17.5, and this morning prints 9748.5; on a hike of 100 the contract should reflect a new Fed effective rate of 258 bps or […]
Big shots are just little shots that keep on shooting!
July 13, 2022 –Ten year auction a bit sloppy, wi was 2.94 just prior and came at 2.96%. Bid to cover soft at 2.34. Yield ended at 2.956, down 3.5 on the day. 2/10 anchored to the low, just under -8 bps as FFQ2 went 9767.5 offer late, pegging the July 27 FOMC to exactly […]
2/10 and USD
July 12, 2022 –Attached is a chart of the 2/10 spread, at a new low of -8 bps at yesterday’s close. At the bottom of this note is an excerpt from the Jan 26 FOMC press conference with a prescient question from Jean Yung of MNI. She asked about the possible implications of an inverted […]
Brief perspective on one-yr calendars
July 11, 2022 –Yields rose Friday on stronger than expected NFP of 372k. Ten year yield up 9.3 bps to 3.095%. August FF settled 9767.5, fully pricing a 75 bp hike at the July 27 FOMC. New low posted in EDM3/EDM4 one-year calendar at -64. The lowest one-yr calendar is EDH3/EDH4 at -71. –Just for […]
Euro$ futures pricing is clear. Crypto, not so much
July 10, 2022 – Weekly comment Stronger than expected Jobs report solidified expectations for another 75 bp hike at the upcoming July 27 FOMC. Twos, fives and tens all started the week just above a yield of 2.8% but ended around 3.1%. Tuesday to Friday changes: two-yr 2.82 to 3.11, five-yr 2.82 to 3.14 and […]
Payrolls Friday
July 8, 2022 –Yields pressed higher going into today’s payroll report, with treasuries all ending above 3% (2y 3.037, 5y 3.051, 10y 3.002 and 30y 3.19). NFP today expected 268k from 390 last. Avg Hourly Earnings yoy expected 5.0% from 5.2% last. Bullard and Waller continued to make the case for policy front-loading; FFQ2 fell […]
And then, depression set in
July 7, 2022 –Flattener yesterday as Fed minutes warned of the risks of entrenched inflation. Red eurodollar pack was the loss leader in rates, closing down 19.5 bps; EDH4 and M4 were both -20 on the day. The two year yield jumped 14 bps to 2.955%, while tens rose 10 bps to 2.908%, enough of […]
Commodity washout
July 6, 2022 –Commodity dump with CLQ2 (WTI) down over $10 at one point; late market was 99.62 down 8.82 but this morning CLQ2 is back just above 100. Other products hit hard as well, for example Sept Wheat down 39 cents and Copper down 19 cents. The ten year breakeven (treasury yield minus inflation […]
Will inflation ‘catch down’ to the new economic reality?
July 4, 2022 – Weekly comment Fierce decline in US rates in the past week, punctuated by a drop of nearly 11 bps in the five-year yield on Friday alone, to 2.894%. On the week the 2yr declined 21.4 bps to 2.84%, fives 28 bps, and tens 22.5 bps to 2.90%. The rally in red […]
