Feb 12. Stay the course…
–Dana Carvey used to do a pretty funny skit on SNL mocking the first President Bush, giving a starry-eyed speech repeating the same empty platitudes: “…stay the course….thousand points of light…” Well, both Reuters and WSJ described Yellen as “staying the course.” And that’s how the prepared remarks read: Continuity of policy, tapering likely to continue, but not on any hard and fast schedule, Fed monitoring global stress in financial mkts but it doesn’t seem to be spilling over. You might even say it’s “contained”, though a ZH piece this morning mentions that many shadow retail funds in China are backed by coal companies, which now trade below book. Yellen mentioned that low rates tend to support housing and stocks. Sharp eyed equity traders didn’t let that one slip by, taking ESH up 20 handles.
–The player who one week ago loaded up on TYH 125 and 125.5 puts HAS an opinion. It appears he rolled out of a substantial piece of the 125p into TYJ 123 puts which now stand about 1 point or 12 bps out of the money as the ten year auction comes today. There was also a big buyer of TYJ 123.5 puts, which added 30k of new positions. [actually prelim open interest sheets don’t bear out the roll thesis, H 125p +28k and J123p +45k]. I don’t really know if it’s all the same guy, maybe just like-minded, but there are LOTS of TY puts being bought. Of course, maybe he’s just buying the puts HERE and buying Italian bonds THERE, as BBG reports Italy 10’s have dropped to 2006 low of 3.67. (That’s a joke, ok?)
–There were some big trades in euro$ options as well, notably a seller of 40k 0EH 85/90 put spreads down to 6, appears exit of long 9900 puts. Late buyer of 10k 2EM 9862/9837 p spreads. The plunge in vol in interest rate futures seems to have been arrested for the time being.
http://www.marketwatch.com/story/scary-1929-market-chart-gains-traction-2014-02-11
http://www.zerohedge.com/news/2014-02-11/think-chinas-credit-crisis-over-dont-look-chart
