Archive for the ‘Eurodollar Options’ Category
Sept 18. A Hawkish Pass
The Fed is not going to hike on Wednesday. The data has been weak, and the market has been reminded repeatedly of data-dependency, even though the data is utterly unimportant in the context of a shift in both internal central bank polices and external perceptions thereof. Most importantly it’s a political decision. The Fed has […]
In: Eurodollar Options
Sept 16. Sept rate hike odds have evaporated
–This morning Deutsche Bank is down 7% as the bank balked at a $14 billion levy by the US Dept of Justice. An article on BBG says that large banks are resisting Basel III regulations: “Some European officials went so far as to say they wouldn’t adopt the proposals on the table, according to the […]
In: Eurodollar Options
Sept 15. Theory vs Reality
–Yields fell yesterday with the ten year easing 4.3 bps to 168.9. However, the curve continues to steepen as shorter maturity yields fell faster. This month’s move in the 5/30 spread has been spectacular, running straight up since the beginning of the month from 103 bps to yesterday’s 124.7. 2/10 treasury spread was 75 bps […]
In: Eurodollar Options
Sept 14. Keeping up with the Joneses, risk parity style
–On Monday there was a slight steepening on the back end of the curve, and on Tuesday this bear market steepening became more pronounced. New highs in many curve measures, for example 2/10 treasury spread gained 3.2 bps to close at a new recent high of 90 (this was as low as 75 at the […]
In: Eurodollar Options
Sept 13. Brainard throws cold water on Sept hike; greenlights steepeners
–Brainard’s speech yesterday caused the market to defer expectations of a hike from next week to December. October Fed Funds settled up 2 at 9957, indicating less than 15% odds of a hike in Sept, while Nov/Jan FF spread rose 0.5 bp to a new high at 10.5, odds of about 42% for December. While […]
In: Eurodollar Options
Sept 12. Why, he stubbed his TOE!
–Pneumonia? She’s been coughing for months. Who’s her doctor? Phil? In any case uncertainty is rising in front of the US election. In Europe, following up on Draghi’s comments last week that ‘structural reforms need to be substantially stepped up’, Dijsselbloem came up with this solution:(Reuters) “Times are changing. You need to pay your taxes in […]
In: Eurodollar Options
Abby Normal
The central theme of this week’s note is that IF the change in perception of central bank policies is edging toward a tipping point, then violent re-pricing is possible across many asset classes. The market has become so used to the idea of central bank backstops that there’s institutional amnesia about how things *could* shake […]
In: Eurodollar Options
Sept 9. When faith in Central banks crumbles, stocks and bonds will fall together
–Draghi spurred a sell off yesterday as he quashed hopes that the ECB would be more aggressive in terms of stimulus. The ten year yield rose to 161.3, up nearly 8 bps, almost a complete reversal of Tuesday’s rally associated with weak Service ISM and Labor Mkt Conditions. Euro$ calendar spreads firmed. For example, red/gold […]
Sept 8. FOMC Conditions, Sept 2015 to Sept 2016
Just a couple of thoughts about the FOMC meeting on Sept 21. Going into the September 2015 FOMC on Sept 17, the Fed had been prepping the market for the possibility of a hike. Ultimately, the Fed passed on a move in September and instead hiked in December. We’re facing a similar situation now. However, […]
Sept 7. Persistent regime….persistently weak
–Yields plunged as Service ISM sank to its lowest level since 2010 at just 51.4. The Fed’s Labor Market Conditions Index also fell to -0.7. The ten year lopped off 5.5 bps to 154.1. Even more ominously, some of the deferred one year eurodollar calendar spreads made new lows, with June’17/June’18 at just 11 bps. […]
