Archive for the ‘Eurodollar Options’ Category
If everyone is thinking alike, then somebody isn’t thinking
If everyone is thinking alike, then somebody isn’t thinking –General George Patton There are a few things that come to mind when looking at this week’s markets. Strangely enough, General George Patton is one of them. For those who don’t know, Patton was a famous, controversial, and profane leader of the Third Army in World […]
Dec 9. Curves steeper in wake of ECB / Fed’s Z1 debt levels
–Curves steepened in the wake of the ECB meeting, which featured a slight taper from €80b month to €60b beginning in April, but also expanded the amount of shorter term paper the bank could buy. The German curve (2/10) immediately rallied to levels not seen since June of 2015, and has now surged from around […]
Dec 4. The Price of Risk (or Raising the ‘G-A-S’ factor)
Trichet [in 1994] declared that monetary union would permit the elimination of risk premiums. In the middle of the following decade he appeared to have been right: Greek government bonds, for instance, yielded virtually the same as German gov’t bonds of the same maturity, and for a brief period in 2007, Spanish gov’t bonds yielded […]
Dec 2. NFP and Italy Referendum
–Flow continues to favor the downside in interest rate futures. Ten year yield edged just above 249 before coming back down to 243.9 at the futures close. Next stop should be around 260 to 262. Another 40k bought in TYF 122/120.5 ps covered 124-08…settled 10 ref TYH7 123.315. Continued curve steepener trades in dollars, primarily […]
Dec 1. Large euro$ trades
–Bearish factors sent yields close to new highs yesterday, with tens up 6 bps to 236.5. An OPEC deal caused oil to explode higher by nearly 10% from Tuesdays’s close, a rally of over $4, and this morning CLF is nearing $50. ADP was much stronger than expected at 216k. The new Treasury Sec’y suggested […]
Nov 30. Oil and China
–Oil up 2.67 to 47.90 as of this writing on prospects for an OPEC production cut. US interest rates fell slightly yesterday, but have rebounded this morning. TYH currently 125-245, right around early levels yesterday. Data today includes ADP, Personal Income and Spending +0.4 and +0.5, with Core PCE yoy holding steady at 1.7%. […]
Nov 23. Trump: the volatility denouement
–Tuesday was as large of a vol crush as I have seen recently. Many euro$ straddles lost 2-3 bps. (Perhaps Kanye was just long vol?) As an example consider 0EH 9850 straddle (red midcurve March) that settled 28.5 on Friday, then 27.5 Monday, and 26.0 yesterday. 2EH 9812 straddle (green march midcurve), settled 41 on Friday and […]
Nov 22. Flows suggest steepening has ended for now
–While net changes in interest rate futures were small, there were quite a few position adjustments of note. First, open interest continues to rise in almost all interest rate contracts. For example, there was a large seller of EDH7 yesterday which closed -1.0 at 9896.5, with an increase in OI of 62k. Total ED OI […]
Nov 20. Past Performance is no Guarantee of Future Results
When I sent last week’s note, I thought it was a little ‘loose’, that perhaps I could have boiled down some thoughts and left others out, but on a re-read, I did mention a couple of things that worked out. Most notably, “Given the incredible shift in sentiment and the fact that positioning still needs […]
Nov 21. All of a sudden it’s important to hedge
–ESZ starting the holiday week near new highs and crude oil is up 74 cents with CLF7 over $47/bbl in a formation which looks similar to the bounce off August lows. Two year auction today; the w/i was 1.07 late Friday, a safe and relatively juicy yield, especially in light of the upcoming Italy referendum. […]
