Archive for the ‘Eurodollar Options’ Category
July 15. Late Cycle Behavior… What’s next?
Both Jeffrey Gundlach and Bill Gross made bullish calls on commodities earlier in the year. I think I recall Gundlach saying a rise in commodities is ‘classic late stage behavior’. I did a quick search and found this quote from mid-January: “Commodities always rally sharply – much more sharply than they have so far […]
July 13. Implied vol crushed on US interest rates; CNY makes new low
–Vol crushed in rates yesterday on heavy straddle sales. With inflation data out of the way, and auctions having been easily absorbed, all straddles on ED curve lost 1-2 bps. In addition, publication of an interview with Powell was uneventful. Sales included 5k EDU9 9812.5^ at 44.0, 7k 0EH 9700^ at 43.5, 5k 0EM 9700^ […]
July 12. Commodity Carnage
–It’s been a tough month for most commodities besides oil, which did its best to catch up yesterday with Aug WTI down 3.73 yesterday to 70.38. Grains made new lows. Dec Corn was 4.25 in early June, closed at a new low yesterday near 3.53. Beans have plunged from 10.60 to 8.48 over the same […]
July 11. Trump admin pokes China while preparing for NATO/Putin
–Late yesterday, the Trump administration ratcheted up the trade war with China by threatening fresh tariffs, causing an immediate sell off in stocks. Russell 2000, on a technical basis looks particularly vulnerable, with the index setting a slight new high early in the day (1708 cash index), creating a double top with June 21 high, […]
July 10. Copper vs Oil
Attached is chart of front copper vs front crude oil contract. Seeing a pretty large divergence in direction on these two economically sensitive commodities. However, I have noted in rectangles several other instances of copper declining while oil maintained a rally, and these have concluded in favor of the rising oil trend. However, in this […]
July 10. Crude oil and copper sending different signals on economic strength
–Remarkably quiet in rates even as stocks soared. The British pound was hit after the resignation of Boris Johnson from May’s cabinet, but it’s still holding above the low set in late June. Oil was lower early in the session but came back to close positive. CLU8 71.98 up 41 cents…highest high has been 72.85. […]
July 9. China supporting stocks
–China seems to be having a much larger impact on global markets. Yuan slightly stronger and Chinese stocks rebound; here’s a clip from Reuters: “China’s bourses sailed higher after its securities regulator said on Sunday it planned to ease restrictions on foreign investment in the Shanghai and Shenzhen stock markets, and told banks to significantly […]
July 8 Weekly. Running with the bond bulls
Despite the release of FOMC minutes and Friday’s employment data, net week-over-week changes were small. The most notable market event was inversion of the Eurodollar curve, where the red pack (2nd year forward) to gold pack (5th year forward) settled NEGATIVE 0.5 bp on Thursday (it bounced back to +0.75 Friday). In treasuries, 2/10 and […]
July 6. Employment data
–Trade war with China becomes a reality as tariffs begin. Employment data today with NFP expected 195k, average hourly earnings +0.3 and +2.8% yoy. New curve lows yesterday, for example 2/10 closed at 28 bps, down just over 3 bps and lowest since 2007. Even more stark was the inversion in red/gold eurodollar pack spread, […]
July 3. Scarcer reserves and t-bill supply
“Gradually reducing the Federal Reserve’s securities holdings will result in a declining supply of reserve balances.” From the Fed’s June 2017 addendum regarding Policy Normalization. –Interesting article in WSJ on 1-July: ‘Fed faces decisions on shrinking is huge bond portfolio’ notes that reserves are becoming more scarce. From the article,”…developments in short-term money markets of […]
