Archive for the ‘Eurodollar Options’ Category
Higher for longer sparks creative incentives
August 28, 2023 –Higher for longer theme in the wake of Powell’s comments. New high SFRU3/U4 -75, up 4 on the day and up from -177 from May 11. SFRZ3/Z4 settled -113.5, also a new recent high. –Vol hit as futures trading was rather subdued in rates post-Powell. For example, on Thursday TYV 110^ settled 1’55 vs […]
The Price is … Uncertain
August 27, 2023 – Weekly Comment ************************************** Bob Barker, host of the legendary game show ‘The Price is Right’ passed away at 99 this weekend. He seems to have identified a winning formula, subtly alluded to in the picture below. He was confident of the price and of the strategy. In the classic 1979 movie […]
The Jackson Hole Arena
August 25, 2023 –Powell today at Jackson Hole, starts at 10:00 EST. –SFRU3/SFRZ3 settled at +1.0 (9456.5/9455.5). Buyer of 40k SFRZ3/H4 at -16.5, settled -16 (9455.5/9471.5) the high in this particular spread since October. Calendar spread buyers have a ‘higher for longer’ bias with respect to Jackson Hole and Powell. That is, if the Fed maintains, Z3/H4 […]
We’re now restrictive, but must hold until the job is done
August 24, 2023 –The Fed Effective rate is 5.33% or 9467.0. FFX3 (Nove Fed Funds) captures the next two FOMC meetings, Sept 20 and Nov 1, and remains pegged between 9456 and 9460. At yesterday’s settle of 9456.5, it’s close to 50/50 for another 25 bp hike at one of the next two meetings. FFX3 […]
Financial Conditions Tighten
August 17, 2023 –Stocks and bonds sliding lower. SPX yesterday -0.8% and Nasdaq Comp -1.15%. Ten year yield +3.7 bps to 4.256%. SOFR contracts from June’24 to June’27 down 3 to 4 bps. As of this note, TYU trades 109-105, having settled 109-18 yesterday. On the front TY contract at the time, 109-115 was the […]
Strong sales but credit crumbling
August 16, 2023 –Retail Sales much stronger than expected at 0.7% and 1.0% ex-auto and gas (m/m). 10yr yield made new high, just eclipsing last October’s high close at 4.245, spiking to 4.268 post-data, but came back and marked at 4.219 at futures settlement time. Once again, near SOFR one-year calendars edge to new highs. SFRZ3/Z4 […]
Bear Market in Rates
August 15, 2023 –Surprising weakness in front end/belly yesterday. In SOFR, red pack -8.5 (rate of 4.1625%) and green pack -5.75 (rate of 3.73%). In treasuries, 2y +6.8 bps to 4.961%, 5s +4.8 bps to 4.355%, 10s +1.8 to 4.182%. Selling has persisted overnight. Yesterday TYU3 settled 110-00 and last print (6:30 est) 109-23+. USU3 […]
If you’re renting from Blackrock and can’t make the payments, but the guy across town owns his home outright, how many 0DTE options should you buy?
August 14, 2023 –Continued slide in TY and US futures Friday. 10y yield +8.6 bps to 4.164% and 30s +3.4 bps to 4.27%. –On the SOFR curve the pivot point had been reds (rally the hardest, sell off fastest) and in turn the red midcurve straddles had been more expensive. However, given weakness in the […]
Mid-August musings
August 13, 2023 – Weekly Comment ************************************** I like to keep my issues strongIt’s always darkest before the dawn–Florence and the Machine – Shake It Out Feels like a shakeout might be coming. Of course, VIX and MOVE aren’t really reflecting it. Nothing happens in August until Jackson Hole right? Vol has a tendency to […]
Ticking Time Bombs
August 11, 2023 –Treasuries enjoyed a brief rally after inflation data came out slightly better than expected 3.2% yoy with Core 4.7% yoy. However, going into and especially coming out of the 30y auction there was nothing but selling pressure. Blame was laid at the foot of the gov’t budget statement…really no surprise it’s gushing red ink, […]
