Archive for the ‘Eurodollar Options’ Category
Bring on 2025
December 31, 2024********************* –Yields eased yesterday, with tens down 7.6 bps to 4.543%. Current is 4.52 (pre-open). Year’s range 3.62 to 4.71; the low coincided with the Fed’s initial 50 bp ease in mid-Sept. Tens are currently about 20 bps above the Fed Effective rate. –BBG article this morning ‘Treasury’s $50 trillion Deluge Will Test […]
We can absorb delinquencies on credit cards. CRE?
December 30, 2024******************** –Big trade Friday as stocks slid: New buyer of 50k SFRM5 9612.5/9662.5cs vs 9556.25p for 3.0 to 3.5 covered 9592. 9612.5c 13.0s OI +43.5k. 9662.5c 6.0s OI +54k. M5 9556.25p 4.0s, OI +42k. Spread settle 3.0 ref 9592.0 settle. Stocks are slightly easier this morning and SFRM5 is 9593.5. —Curve steepened Friday […]
Merry New Year
December 29, 2024********************* Chart below is the SOFR futures curve. The white dots are from late Friday. The red dots are from one month ago. The obvious change is the shift to lower prices (higher yields). On November 27, the peak contract was SFRU7 at 9637. On Friday SFRU7 settled 9593. The high of this […]
Tech spending race
December 28, 2024*********************Just one of those charts from the dotcom bubble. There are a lot like this. This one went from 10 in late 1998 to 110 in Q3 2000. And then, poof. The fortunes being spent today on data centers for AI are jaw-dropping, but tech leaders are actually worrying about spending too little. […]
Bonds wobbly
December 27, 2024********************* –In the last two sessions, Tuesday and Thursday, USH5 contract made new lows (113-06 and 113-03) but then closed near the highs of the day (113-28, 113-30). Yesterday was an outside day with a higher close. This price action suggests that selling pressure is becoming exhausted, HOWEVER, this morning’s low is 113-08 […]
Treasury yields press higher
December 24, 2024********************* –New low settles in FVH5, TYH5 and USH5. 106-02, 108-15, 113-18. Ten year cash yield up 6.7 bps to 4.593%. 2/10 treasury spread near its high for the year at +25 bps. Nearest one-year SOFR calendar is H5/H6 which is also the lowest, but now only -18 (9579, -2.0/9597 -4.5). –5yr auction […]
Does USD steamroll higher?
December 23, 2024********************* –Back in September, the difference between the lowest contract on the SOFR strip (SFRU4 at 9505) and the peak (SFRM6 at 9721) was -216. Currently, the lowest contract is SFRH5 at 9581 and the peak is SFRU6 at 9603. (I use old euro$ convention and consider H5 as front contract). That spread […]
Projecting
Weekly comment – December 22, 2024***************************************** As mentioned in Friday’s note, I think Q4 2024 has marked a huge turning point. My focus is on liquidity and a tightening in financial conditions, punctuated by the dramatic rise in yields since the Fed’s initial 50 bp FF cut in September. The 30-yr yield has gone from […]
In: Eurodollar Options
Trend in financial conditions has reversed
December 20, 2024********************* –Usually I jot down a few notes about changes in SOFR spreads, or maybe an interesting macro tidbit. But current market moves appear to me to be a complete change in market dynamics, with signals of a harsh reversal in liquidity and financial conditions. Instead of BTFD it’s now STFR (sell rallies). […]
Hawk tuah
December 19, 2024*********************–That was what the professionals might call, “a hawkish cut”. A couple of weeks ago I had thought the Fed might hold and BOJ hike. Wrong. Only Beth Hammack, Cleveland Fed President saw it my way, she dissented in favor of holding rates steady. Barely mattered as yields jumped, with weakest SOFR contracts […]
