Dec 12. Tales from the Crypt(o)
–Extremely weak close in front end of Eurodollar curve in spite of a small terrorist bombing at a NYC subway. Near contracts settled at new lows; interesting in light of Dec midcurve option expiration on Friday. EDZ8 closed at new low settle of 9790 with 0EZ 9787.5p (1.75s) still having 353k in open interest. Large early trade was +50k EDZ8/EDZ9 spread for 17. (Appears to be new, with OI +18k and +34k in the two contracts). Late in the day the spread was 17.5 bid; 18.0s. This trade perhaps has added significance given the FOMC announcement Wednesday. The Fed’s Projection materials from September show end of year FF rate at 2.1 for 2018, and 2.7 for the end of 2019, so that’s 60 bps. In June, the projected spread was even wider: 2.1 and 2.9. Just prior to the Sept 20 FOMC, EDZ8/9 was 18. In June it was 22.5. The recent high has been 25. EDZ7/EDZ8 closed right at 50 bps. At day’s end EDZ7 went 9840 offer, so 9837.5 puts are still in play.
–Odds for quarterly hikes after Wednesday’s have grown. For example, Feb/April FF spread which isolates the March FOMC, closed up 1 bp at 16.5, and May/July also +1 to 12.5. So March is around 2 in 3 and June is 50/50.
–Not much change on the longer end of the curve despite the ten year auction. 30’s are auctioned today. PPI this morning expected +0.3 with Core +0.2. Oil is up 28 cents as of this writing; last week’s sell off has been reversed. Stocks were quite strong into the end of the day. But if you really want to see powerful rallies underpinned by flawless fundamentals, take a look at RIOT and CRCW (pointed out to me by colleague RW). The latter has soared from $3.30 to yesterday’s close of $642.00, providing it with a market cap of $8 billion. The name of this firm is Crypto Co. Its listed industry is “Clothing”, but of course it has transformed into a Digital Currency Trading Platform, a natural progression from printed t-shirts. (Actually, while I DID see Clothing as the industry, I am not sure what products were sold. What i did learn from Bloomberg is that as of Q3, assets were $3.6 million with a loss of $1.5 million).
–I’ll leave you with a more sobering thought from Doug Noland: Household Net Worth ended September at a record 498% of GDP. This is up from the 378% Q1 2009 trough level. It also surpasses the cycle peaks of 478% back in Q1 2007 and 435% in Q4 1999. Frothy asset prices?
