Archive for the ‘Eurodollar Options’ Category
Trump reversal
Some things are back to pre-election levels: 2/10 treasury spread and USD index. But not stocks….yet
May 16. It’s Lost on Me
–As a result of the Washington Post investigation, Trump has finally discovered the source of White House leaks. (From WaPo: “President Trump revealed highly classified information to the Russian foreign minister and ambassador in a White House meeting last week, according to current and former U.S. officials, who said Trump’s disclosures jeopardized a critical source […]
May 15. Oil upon deal, but treasuries maintain bid
–Solid rally in fixed income Friday with tens down 7 bps tp 233.1. The euro$ curve was slightly steeper from greens back; the green pack (3rd year) was the leader, closing +8.875. Red/gold pack spread edged to a new recent high just under 71 bps. –July Fed funds closed 9892.0, +2.5 on the day, taking […]
May 14. The Litmus Configuration
It was back in 2003 that Jonathan Mardukas (then at Lehman) first postulated his Litmus Configuration Theory. Recall, this was after the dotcom bubble had burst and followed 9/11. The theory states that too much Central Bank interference can result in markets that exhibit extremely low volatility. He named it after the Litmus test because markets would not […]
May 12. ‘Tis but a scratch
–Yields dipped slightly yesterday as auctions concluded with the (underwhelming) thirty year. The ten year yield eased 1.4 bps to 239.8. PPI was expected +0.2 but actually came out +0.5 with Core +0.4. CPI today expected +0.2 both Headline and Core. There is clearly an underlying bid for treasuries as bearish news is ignored. However, […]
May 11. Oh SNAP
–Financial conditions getting more air time… Goldman also notes that conditions have eased in the wake of previous hikes, not the response the Fed intended. However, BBG reports that the rates on student loan debt are increasing going forward, up 0.69% from 3.76 to 4.45. I believe that’s for new loans, not for the $1.4 […]
May 10. When all you have is a hammer….
–If your only tool is a hammer, then every problem looks like a nail. If you’re a volatility seller, then you hammer the bid. For example, Green March 9775 straddles sold in size of 8k yesterday at 54.5, new position, with 311 days to go. USM straddle closed under 2 points with 17 days to […]
Simon Potter and the Fed’s policy transmission
From a speech by Simon Potter (head of NY Fed’s Mkt Desk) on April 5, 2017: https://www.newyorkfed.org/newsevents/speeches/2017/pot170405 The transmission of monetary policy relies on competition within, and integration across, money markets. The FOMC’s policy target is the federal funds rate, which is a measure of what banks pay to take out unsecured overnight loans […]
May 9. Overarching theme…NO RISK
–A couple of themes yesterday. First was the implied volatility crush. Almost every news service trumpeted the fact that VIX is on top of the low from 1993. It’s the same theme in treasuries, where vol is at new recent lows. I marked FVM at just 2.5 and TYM at 3.9 at yesterday’s settle. The […]
Financial Conditions
On March 30, Dudley outlined the five factors of financial conditions. https://www.newyorkfed.org/newsevents/speeches/2017/dud170330 Below I have put all 5 (proxies) on a chart. The vertical lines are the last two Fed hikes. FOUR of the indicators, stocks, ten year yield, the dollar index, and corporate spreads are actually showing LOOSER financial conditions (denoted with a […]
