Archive for the ‘Eurodollar Options’ Category
Poco a poco? Not any more
November 17, 2024 – weekly comment***************************************** This note is not about the market, but about the realignment of incentives. I think this clip of Nayib Bukele, President of El Salvador, crystallizes the inflection point where we now find ourselves. https://x.com/nayibbukele/status/1846375736308887723 In summary Bukele’s advisors said:“You know that you can’t eliminate crime all at once, right?” […]
In: Eurodollar Options
Fed has the ability to approach policy carefully. Uh-oh
November 15, 2024*********************–Knee-jerk selling of rate futures on higher than expected PPI, 0.2 with Core 0.3 m/m. Then prices reversed. TYZ4 109-04+ on the number, then back up to 109-24+ pre-Powell, then to 109-08 post-Powell. –SFRZ5 9600p seller of 40k at 37.0 covered 9614.5, 42d. SFRZ5 9612.5^ settled 90 on Wednesday and immediately traded 88.5 […]
Wide range of outcomes
November 14, 2024*********************–PPI today but the only thing that matters is Powell, on the Economic Outlook, at 3:00. –Big steepening rebound yesterday. 2y yield was DOWN 6.1 bps to 4.379% while 30s were UP 6.1 to 4.636%. As can be seen on attached chart, that’s a new high bond yield. 5/30 had made a new […]
If the Gov’t Efficiency Team is cutting, does Powell ease?
November 13, 2024********************* –CPI today expected 0.2 with Core 0.3 (same as last month) and yoy 2.6 from 2.4 with Core 3.3 from 3.3. –Trump places Musk and Ramaswamy to tighten up gov’t efficiency. When an individual company announces layoffs, the stock often rallies. But culling government bureaucracy may not have the same effect on […]
Bitcoin up/ Gold down / School’s out
November 12, 2024*********************–Light volume as treasuries were closed. Flattening bias with SOFR reds down 7.5 but greens -7.125 and blues -6.25. –Bitcoin explosion with Dec futures up over 10k late to 88300. Precious metals went the other way as DXY continues to rally. DXY now near 106. Dec Gold down nearly $15 this morning at […]
Flatter curve
November 11, 2024********************* –Veteran’s Day. Cash bonds are closed. CME should be but isn’t. –Friday was a flattener trade on light volume. On SOFR strip weakest contract was SFRM5 which closed -6 at 9600 or 4%. Red SOFR contracts (2nd year forward) were -2.75 with an average price of 9622.25 while greens (3rd yr) were […]
Post Election and FOMC
November 10, 2024 – Weekly Comment******************************************* Following the FOMC’s 25 bp cut and Trump’s sweep, SFRZ4 closed on the low at 9557.5 or 4.425%. After Thursday’s Fed cut, EFFR is 4.58 or 9542. So SFRZ4 is only 15 away from EFFR. SFRZ4/H5 spread closed at a new high of -24 (9557.5/9581.5). Roughly looking at just […]
Settling in for higher terminal rates
November 8, 2024******************* -Fed cut 25 as expected, so EFFR should now be 4.58% (from 4.83%). Jan FF contract settled 9560.5, +0.5 on the day, or 4.395%, so the spread to the new EFFR is -18.5, i.e. about 75% chance of another 25 bp cut in Dec. FFG5, which also captures the Jan 29 FOMC, […]
Front runners
November 7, 2024******************** –FFX4 are locked-in for a 25 bp ease today. A cut will take EFFR from current 4.83% to 4.58%. The Jan FF contract prices the Dec 18 FOMC. It currently is 9560 or 4.40%. If, after today, the Fed holds at 4.58, then FFF5 goes to 9542.0, or 18 lower. On another […]
It’s over
November 6, 2024******************** –It’s my solemn hope that I don’t have to watch Mark Cuban lectures any more. Apparently Americans don’t like being talked down to. Congrats to the Frenchman (bad news is that he hedged with bitcoin!). And congrats to Musk who went all-in. –Yesterday brief summary: Curve flatter and implied vol eased from extended levels. On the […]
