Archive for the ‘Eurodollar Options’ Category
Slaves of some defunct economist
April 2, 2022 – Weekly comment Challenge of Central Banking in a Democratic Society- Dec 1996 – Irrational Exuberance speech …The stagflation of the 1970s required a thorough conceptual overhaul of economic thinking and policymaking. Monetarism, and new insights into the effects of anticipatory expectations on economic activity and price setting, competed strongly against the […]
April Fools
April 1, 2022 –PCE prices came out about as expected, 6.4% yoy with Core 5.4%. Today the employment data is released, with NFP expected 490k vs 678k last. Unemployment rate expected 3.7 from 3.8 and yoy Avg Hourly Earnings expected +5.5% from 5.1% last. Since the year 1970, there has only been one year with […]
RESOLVE
March 31, 2022 –It’s the last day of the first quarter and today the Fed’s preferred measure of inflation is released: PCE prices expected 6.4 yoy vs 6.1 last month, with Core expected 5.5 vs 5.2. At the last FOMC, just two weeks ago, the SEP projection for 2022 for PCE prices was 4.3% with […]
A lot’s priced in
March 30, 2022 –Another day, another day of flattening. 2/10 treasury spread briefly inverted but was +5 at the end of the day, with 5/30 just under 4 bps. However, the eurodollar curve from reds back, (starting with EDM’23) slopes ever higher in price and lower in yield. EDM3 still the lowest price/highest yield on […]
Clues
March 29, 2022 –5/30 treasury spread briefly inverted yesterday and closed just above zero, with 5s 2.56% and 30s 2.569. It’s worth mention that the lowest contract on the SOFR curve is EDM’23 at 9703.5 and lowest Fed Fund contract is FFU’23 at 9698.5. These forward financing yields at 2.965 and 3.015 are 40+ bps above the […]
Regime Change
March 27, 2022 – Weekly comment On Friday, Citi modified its rake hike forecast for 2022 to 275 bps. January 2023 FF fell 14.5 on Friday to 9759.5 or 2.405%, so the market is getting fairly close to pricing that outcome. With the current FF target 0.25 to 0.50 bps and six FOMC meetings left […]
Treasury vol bid
March 25, 2022 –Treasury vol closed very strong. As attached chart shows, FV is near the high. The chart looks like oil or gold…spikes on initial Ukraine aggression, then a pullback mid-month. Oil and gold rebounded off the retracement lower, but are not near the highs from the early part of the month; in fact […]
Tell him the good part
March 24, 2022 –In terms of the market’s perception of Fed tightening, perhaps there is nothing cleaner and clearer than a couple of FF calendar spreads. The attached image shows the six-month calendar July’22 to Jan’23 Fed Fund spread. It settled at 101, nearly 4 twenty-five bp hikes exactly, as it prices the four FOMC […]
Is the end of forbearance another hike?
March 23, 2022 –Powell speaks today at a panel on Emerging Challenges for CBs in a Digital World, 8 am. –Yields continued to rise to new highs with tens +6.5 bps to 2.373%, and twos up just 3 bps to 2.15%. One interesting note from yesterday’s action is that the curve steepened slightly on the […]
No cigar
March 22, 2022 –It has been an amazing March so far. On March 1, EDM3 settled 9818.0, At yesterday’s settle it was 9702.5, down 115.5 bps in three weeks. The 2 yr note yield has gone from 1.34% to 2.12%. FFF’23 settled yesterday at 9778.5 or 2.215%, which prices 188.5 bps of tightening over the […]
