Archive for the ‘Eurodollar Options’ Category
Winter solstice
December 21, 2021 –Shortest day in the Northern hemisphere.–Curve steepened yesterday as the bond contract reversed early strength and had an outside day, closing near the lows. The two year yield fell 1.2 to 62.8 bps while thirties rose 3 to 1.846%. Stocks reacted negatively to omicron concerns and Manchin’s refusal to back BBB, but […]
Montani Semper Liberi
December 20, 2021 –West Virginia’s Manchin has decided not to support Build Back Better, causing stocks and oil to crater. The resulting curtailment of government spending plans has caused several shops to trim estimates for GDP going forward. An avalanche of bad press over Omicron is also a factor, with Biden scheduled to address the […]
Variable Lags
Weekly Comment – December 19, 2021 At the FOMC press conference, Steve Liesman asked an interesting question about long and variable lags inherent in monetary policy, adding that actions on the taper might not have an effect on inflation for six months to a year. Powell’s response was reasonable, noting that deliberative, methodical changes best […]
In: Eurodollar Options
Got nothin’
December 17, 2021 –In Wednesday morning’s note I suggested the outcome of the FOMC press conference was likely to be a steeper curve and lower front end vol, as I imagined Powell would sound a dovish note. He was much more aggressive than I thought. But yesterday, the curve steepened and vol was crushed, punctured […]
Hawkish Pirouette
December 16, 2021 –I was wrong about Powell sounding a more dovish tone at the press conference; front end contracts were the weakest on the strip with EDM2 and EDU2 settling -5.5 at 9943.5 and 9922. The five year treasury rose 2.5 bps in yield to 1.255% while 30s were up 3.6 to 1.852%. In […]
FOMC day
December 15, 2021 –FOMC today. Here’s what I think is going to happen. At 2pm when the announcement and SEP are released, there will be a knee-jerk reaction lower in near and red ED contracts because the dots are going higher as are the inflation projections, even IF the taper is accelerated. However, at the […]
Turbo Taper Trepidation
December 14, 2021 –PPI released today, expected to be 9.2% yoy from 8.6 last, with Core 7.2%. Monster numbers. At the same time, the top headline on zerohedge is: Morgan Stanley Warns the Fed’s Turbo Taper Will Trigger Market Chaos Over ‘The Next 3-4 Months’. I didn’t bother to read the article, but continued pressure […]
Intervention
December 13, 2021 –Friday’s 6.8% yoy print in CPI caused little reaction; curve steepened slightly with the two year yield down 2.4 bps while the 30-yr bond rose 2 bps to 1.882%. It was more noticeable on the dollar curves as reds closed +4.25 and golds -3.0. Midcurve expiration was quiet. SPX closed at a […]
Powell Presser Pause
December 12, 2021 -Weekly Comment At the September FOMC, the Projections for the PCE Deflator went from 3.4% to 4.2% and for Core from 3.0 to 3.7% for 2021. Just like always, the Fed was playing catch-up to the actual data: On August 27, the data were released with PCE deflator 4.2 and Core 3.6. […]
In: Eurodollar Options
Guns and butter. Both more expensive
December 10, 2021 –CPI today expected 0.7% month/month and 6.8% yoy with Core 4.9%. Biden already warned it would be a high number. Yesterday’s 30-yr auction was a bit sloppy with a 3.2 bp to 1.895%; real rates are still extraordinarily negative. At the same time, China is taking steps to arrest strength in the […]
