Archive for the ‘Eurodollar Options’ Category
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June 19, 2023 –Friday featured new recent high SFRU3/SFRU4 at -124 (9469/9593). SFRZ3/Z4 still most inverted 1-yr at -142.5 (9481.5/9624) as Fed dots indicate 100 bps of ease over 2024 (5.6 to 4.6 FF target). Longer curve measures made new lows: 2/10 treasury spread at -95.6 and 5/30 at -14.4. –Powell hones his message in […]
Keeping at it
June 18, 2023 – Weekly Comment************************************ According to the old way of doing things, this coming week SFRU4 would become the first red. On BBG, given that the SFRM3 contract remains listed, the first red will become SFRM4. It doesn’t matter, for the purposes of this note we consider the forward packs which are one […]
The Fed projects 100 bp ease in ’24, the market projects 150
June 16, 2023 –Yields declined in the wake of the FOMC, even though the dot plot suggests more tightening this year, and Fed officials are likely to try to jawbone their inflation resolve. According to FF futures settlements, FFQ3 to FFF4 is -6.0 (9475.5/9481.5), so there is no hiking priced, but the market is giving […]
Really?
June 15, 2023 –Big surprise out of Fed day was the increase in the dot plot regarding the FF target. The end-of-2023 dot went from 5.1% (projected in Dec and March) to 5.6%, and end of 2024 dot went from 4.3% in March to 4.6%. That effectively conveyed the message that NO EASING is coming […]
FOMC day
June 14, 2023 –CPI about as expected with a big drop in yoy headline from 4.9% to 4.0%. FFM3 settled +2.25 at 9490.75 or 5.0925%, very close to the current EFFR of 5.08 and FFN3 settled 9487.0 or 5.13%. These settles indicate high market confidence of a Fed ‘skip’ today. FFQ3 settled 9474.5 or 5.255% […]
Dots and Dissent
June 13, 2023 –How does the Fed ‘skip’ but convince the market that easing is a long way off? Powell can convey that message at the press conference. Could a change in ‘dots’ in the SEP help? In both December and March the end-of-2023 dot for FF was 5.1%. The Fed has reached that goal. […]
The Last
June 11, 2023 – weekly comment ********************************** “Every trail has its end, and every calamity brings its lesson” James Fenimore Cooper – The Last of the Mohicans A week from Monday will be the final settle of the last Eurodollar contract, EDM3. Eurodollar futures settle to three-month libor. As I recall, the survey question for […]
Shifting into reverse
June 9, 2023 –Rates declined in a flattening trade as Jobless Claims came in at 261k, the highest level since Oct 2021. Two-yr note fell 2.7 bps to 4.517% as tens eased 6.6 to 3.714%. While SFRZ3 trades near 5% at 9503.5, easing in 2024 is still being significantly priced. For example, Jan’24 FF settled […]
Canada hikes, China paving the way for a cut
June 8, 2023 –Bank of Canada raised rates yesterday to 4.75% from 4.5%, but today China’s six state-owned banks cut deposit rates…reducing the rate for 5-yr time deposits to 2.5% from 2.65%. (CNBC). According to Nomura, “This new round of deposit rate cuts, as well as rapidly worsening exports, broadening property distress, ongoing disinflation and […]
Curve and vol back to pre-SVB
June 7, 2023 –Main feature Friday was a more inverted curve with 2/10 around -83 bps, 4 lower on the day. That’s right around the level from the end of last year which was the most inverted since the early 1980s, until the early March plunge to -108 on fears of continued aggressive hikes. Then […]
