Archive for the ‘Eurodollar Options’ Category
Feb 13. Adjustments back to normal?
–Rates were slightly higher as equities rebounded. Tens rose 3 bps to 285.7. In dollars, greens, blues and golds were down 3.5 bps. It was an adjustment day. Open interest in ESH was -89k. Implied vol across the interest rate curve plunged. For example, On Friday, 3EH 9712^ settled 25.0 and yesterday just 21.5. 2EU […]
Feb 12. Stockman’s been sounding that same warning (for the past 33 years)
–In an echo of Ronald Reagan’s administration, US Budget Director Mick Mulvaney said larger deficits this year may cause interest rates to “spike” and said further, “…rising budget deficits are “a very dangerous idea, but it’s the world we live in.” In Reagan’s day the budget director was David Stockman, the supply side guru who […]
Feb 11, 2018. The Gibraltar Aluminum Siding Company (aka The Fed)
This past week, the actor John Mahoney passed away. Though famous for larger roles, I always liked him as Moe Adams, an aluminum siding salesman in Barry Levinson’s Tin Men. The movie is a nostalgic look at early 1960’s Baltimore, in the days of classic 20 foot long Cadillacs with tail fins. Because these salesmen […]
Feb 9, 2018. Cost of protection is going up
-SPX closed -3.755 as contagion from the VIX blow-up spreads. Late yesterday I sent CDX IG attachment which shows a surge of increased demand for CDS protection. Implied vol in treasuries exploded yesterday, for example, with a net change of only 4/32’s in TYM8, the April 120.5 straddle went from 1’36 to 1’44, and was […]
Feb 8, 2018. Reach for yield morphs into panic for funding
–The two year budget deal reached yesterday sparked a fresh bout of selling in fixed income, with the ten year yield up over 7 bps to 284.2, and a slight new high in 2/10 spread at 71 bps. Increased spending is going to translate into higher debt issuance, even as the Fed continues QT. This […]
Feb 6. Forced hand
–War’s over man, Wormer dropped the big one. –What?! Over? Did you say ‘over‘? Nothing is over until we decide it is! – Bluto –Welcome to your first day as Fed Chair Mr Powell. I’ve often said that markets test a new Fed chief, but Yellen slipped through with impeccable timing. A lot of people […]
Feb 4. The dance between stocks and bonds
“No mistakes in the tango Donna, not like life. It’s simple. That’s what makes the tango so great. If you make a mistake, get all tangled up, just tango on.” –Lt Col Frank Slade It was a pretty important week, so I was just going to stick to the big market moves, without any corny […]
Feb 2, 2018. The bond groundhog sees his shadow
–Big day yesterday in front of today’s payrolls. NFP expected 175-185k and Avg Hourly Earnings +0.3. Yields rose and the curve steepened on large volume. Implied vol firmed. Total ED volume was 4.77m and open interest was up 217k. TY volume 2.1m with open int +61k. The ten year yield jumped 5.5 bps to 277.3 […]
February 1, 2018. Macro issues
–It would be completely reasonable to see a dollar bounce from these levels. As shown on chart below, DXY has achieved the 61.8% retrace in an environment where the Fed maintains its tightening bias. The interest rate curve is also suggesting dollar support, as euro$ back calendars continue to firm. All one-yr calendars from EDH8/H9 […]
Jan 31, 2018. Bond fundamentals
–Going into Trump’s State of the Union address SPX fell 1.1% and VIX firmed to 14.26. Dollar is weaker this morning, stocks have stabilized. –The long end of the market did not respond to equity weakness yesterday; tens rose 3.2 bps to 272.4 and 30’s rose 4.1 bps to 297.9. All eurodollar calendar spreads made […]
