Archive for the ‘Eurodollar Options’ Category
It’s a China story
April 1, 2019 –US stock index futures are responding strongly to China’s PMI print of 50.5, a bounce from last month’s three year low of 49.2. New Mfg Orders came in at 51.4, a five month high. ESM currently +20.25 at 2858.00. On the other hand, the German data were dismal. From Reuters: Mfg PMI […]
What does Kudlow know?
March 31, 2019 – Weekly In November the US ten year yield reached a high of 3.20%. Now it’s 2.40, a drop of 80 bps. In October, China’s ten year yield was 3.70, now 3.07, a drop of 63 bps. Japan’s 30 yr yield was 95 bps on Oct 4, now 50, a drop of […]
Inflation expectations
March 29, 2019 –In one of his recent speeches, Powell highlighted the importance of inflation expectations in terms of policy. From a Bloomberg article dated March 15: “Testifying before Congress on Feb 26, Powell called inflation expectations ‘the most important driver of actual inflation.’ ” If that’s the case, then the U of Mich inflation […]
Heavy short end option flow
March 28, 2019 –A lot of attention has been given to the EDZ9 9750/9737/9725/9712 put condor which was bought yesterday in size of 200k from 3.5 to 4.0. Settled 4.0 vs 9764.0. Breakevens 9746.0 and 9716.5 (from settlement). Max gain at expiry of 8.5 occurs between the middle two strikes. If the Fed doesn’t ease […]
WE NEED RATE CUTS! (at least that’s the message from the markets)
March 26, 2019 –Rate futures and vol exploded Monday, with the red euro$ pack (2nd year forward) up another 11.25 bps, leading the surge. The ten year yield fell 4 bps to 2.414%. All near euro$ calendars made new lows, with front EDM9/EDU9 three month spread at -12.0. The lowest one-year calendar is the front […]
It’s over
March 25, 2019 –On Friday all near ED calendars made new lows as stocks sold off. The first eight 3-month calendars are inverted with the lowest being EDZ9/EDH0 at -13.0. The lowest one-year spread is now the front EDM9/EDM0 which settled -34.0. These spreads, along with January 2020 Fed Funds at 9780 (20 bps below […]
Dislocations
Weekly note – March 24, 2019 In last week’s pre-FOMC note I said the dots would likely be irrelevant. That was wrong. I thought the Fed would trim one hike from the 2019 forecast, and instead, they cut two, now indicating no hikes in 2019. Apparently, the market was leaning my way, because the strongest […]
Bund yield sub-zero first time since 2016
March 22, 2019 –EDZ9/EDZ0 posted a new low settlement of -26.0 yesterday, with front Dec pressured in part by option trades (buyer of 40k EDZ9 9750/9737/9725/9712 put condor for 5.25). Also of note is that the Fed Effective rate ticked up to 2.41%, 1 bp above the interest on excess reserves, causing sales in front […]
The Fed Folds
March 21, 2019 –The Fed effective rate is 2.40%. As of floor close yesterday, both 2’s and 5’s were lower at 2.398 and 2.334. Three month libor is around 2.60. The ten year yield as of floor close was 2.537. The first nine 3-month euro$ calendar spreads settled negative (inverted) [thanks DK]. EDZ9/EDZ0 is still the […]
Odds and ends
March 20, 2019 –FOMC day. Dots and balance sheet plans will be scrutinized, with an expected announcement of a schedule to end balance sheet run-off. A decision regarding the maturity of the Fed’s holdings is likely further down the line. The Fed has consistently warned of risks relating to a global slowdown, which was on […]
