Feb 20. Fed Minutes Today

–Yields eased Tuesday with tens -2.1 bps (from Friday) to 2.643.  In euro$’s, EDU9 through the golds settled +3.0 to +4.0 with a modest bias toward flattening; red/gold pack spread edged to a new recent low of 9.25 bps.

–Option activity favored upside.  For example, EDU9 9725/9712 put spreads were sold on exit at 2.5 over 100k, but there’s still likely 150k left to go.  Settled 2.25 vs 9738.0.  There were quite a few call structures, but I will just mention a few on EDZ9 since that contract still has the most interest on the futures side.  First, the selling of straddles continues, with EDZ9 9737 straddle sold at 26.5, 5k (settled 26.5 vs 9735.0).  There was a buyer of 20k EDZ9 9800/9900c spds with +40k 9850 calls for 4.0 covered 9735 and 9734.  And then a buyer of another 20k EDZ9 9800c vs EDH0 9800/9850/9900 c fly for 0.75.  In any case, EDZ9 9800c settled 2.25 vs 9735.0….the Fed dots last indicated 2 hikes in 2019…the market is leaning in the exact opposite direction as Fed minutes from January are released today.  In fact, EDZ9 9700 puts, which are only 35 bps out of the money settled at 2.0, a quarter bp under the 9800 calls which are 65 out as the underlying futures trade just 5 bps away from the current Fed Funds Effective rate.


Reuters article notes the change in the stance of Central Banks:

https://www.reuters.com/article/us-asia-economy-rates/in-sharp-u-turn-monetary-policy-easing-back-in-play-across-asia-idUSKCN1Q90G0

Posted on February 20, 2019 at 5:18 am by alexmanzara · Permalink
In: Eurodollar Options

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