Archive for the ‘Eurodollar Options’ Category
March 23. Let’s Make a Deal
–The eurodollar curve continues to flatten. June’17/June’18 closed at 47, down 2.5 on the day, down 11.5 from last week’s high of 58.5. All spreads are in support areas currently from both a technical and fundamental basis. On the technical side, most are at the lows since the early part of December. Fundamentally, they’re a […]
March 22. Hey… any catalysts for this?
–Risk off. There are many reasons for yesterday’s sell off in stocks, but the fact is that they have been lurking in the background for some time, and finally coalesced into a ‘correction’. SPX -1.25%, Nasdaq -1.8, Russell -2.7, KBW bank etf -3.9, and KBW regional banks -5.5%. The Trump rally has run into political […]
March 21. Rates slipping lower as Fed taken out of the equation
–Yields drifted lower yesterday in the context of a flattening curve. The ten year fell nearly 3 bps to 247.0. The only one-yr eurodollar calendar spread clinging in the thin air above 1/2% is EDM7/EDM8 which settled 51, down 1.5 on the day. Once again, there was substantial adjustment of option positions, reflecting libor targets […]
March 19. Risks balanced, but large in both directions
American girl, she tell a lie/ She say ‘til then’, she mean goodbye. –Chuck Berry, Havana Moon https://www.youtube.com/watch?v=ipTvgnXtYtQ One of the great things about Chuck Berry is that, in the early days, he insisted on being paid in cash for performances: “Due to being burned early on in his career, and occasional run-ins with […]
March 17. Green midcurves get hammered for St Pat’s Day
–Vol continues to be pounded in the aftermath of the Fed. Libor/ois continues to compress. Open interest in EDM7 puts declined by 108k with a buyer of 40k 9875/9862/9850p flies for 4. 9862p settled at 2.75 ref 9868 and still have 838k open. –The eurodollar strip was nearly unchanged, though the ten year yield rose […]
March 16. Moving to neutral
–The Fed hiked and maintained the forecast of 3 hikes in 2017. April Fed Funds settled 9911 and July at 9898.5, exactly 12.5 lower, so essentially 50/50 for a June hike. Fed’s end of 2017 FF projection is unch’d at 141 or 9859, but FFF18 settled 9871.5, +4.5 on the day, a rate of 128.5. Once […]
March 15. FOMC day. Hike is priced; watch the ‘dots’
–Yields remain pegged to the high end of ranges going into the Fed. Slight drop in tens, -1.3 bps to 259.3 as call spread buyers in TY dominated the action. For example, a buyer of 10k Week 1 April (expires on employment day) 123.75/124.5cs for 11. –HYG and JNK (hi-yield etfs) have encountered heavy selling […]
March 14. Pre-FOMC adjustments
–Yields edged higher Monday on light volume, as pre-FOMC adjustments occurred. The ten year rose 2.6 bps to 260.6. Open interest was mostly lower in treasuries, though there was a large buyer (100k) TYJ 122p for 9 to 11. Settled 11 ref 122-255, 24 delta, expires one week from Friday, a bit over 10 bps […]
March 12. Summers’ wisdom
I am not a big fan of Larry Summers and his secular stagnation thesis, “…an excess of savings over investment.” It sounds a bit like re-heated Keynes, who my old college prof Robert Eisner distilled with this summary: “Investment doesn’t necessarily equal intended investment.” That was Keynes breakthrough, though it’s now all been bastardized to […]
March 10. Global change in rate sentiment
–Employment data today with NFP expected 200k. March midcurve options expire. US rate futures closed on their lows going into the data with the ten year yield up 4.5 bps yesterday to 259.6. All eurodollar one-year calendar spreads made new highs, with EDM7/EDM8 +2 bps tp 59.5. I wouldn’t have thought today’s data would be […]
