Florida man

April 25, 2019

–There’s an amusing viral internet search game: Florida Man on your birthday.  It really doesn’t matter what the day is, a headline is almost certain to pop up with Florida Man engaging in some crazy, drug-(and/or booze)-inspired antics.  As Esquire notes, Florida Man is now a brand.  “He is the frayed fabric of a worn tobacco ring in his left back pocket.”  Sounds like a Peterman catalog ad.


My boring adaptation is to google the name of a country, followed by “cuts economic growth forecast”.  A lot of those headlines are from earlier this month.  April 3, “Germany’s leading economic institutes have revised down their growth forecast….”  April 9, Italy cut its growth forecasts & IMF cuts global growth forecast.  March 19, Paris revised down…  Etc.  Yesterday, it was Canada: (Rtrs) ‘Bank of Canada cuts growth forecast, abandons talk of rate hikes.’  And today, it’s South Korea, Asia’s 4th largest economy, which actually DELIVERED with Q1 growth negative 0.3% vs expected +0.3%.  The Korean won broke out of its stable range since July, and fell to a new low vs USD.  Low exports were the culprit. BOJ also out today, with a headline from FT noting the bank ‘vows to hold rates at zero until spring 2020.’  BOJ is also creating a facility to lend etfs, apparently to increase liquidity, since they now own EVERYTHING.  With quantitative purchases of every asset under the rising sun, Japan has smothered returns and liquidity and trading activity and risk perceptions.  

–Euro made a new low yesterday, and today there’s the encouraging news that talks between Deutsche and Commerzbank have failed.  The bund yield is sub-zero and only about 17 bps away from the bottom in mid-2016 of -18.7.  It was about six months later that the euro fell below 1.04 (vs 1.1132 currently).  It’s hardly surprising that there’s global demand for USD (and new highs in DXY).

–In the US, yields fell,  with tens down 5 bps to 2.52%.   On the euro$ curve, reds thru golds were +5 to +5.5.  Insatiable buying of call spreads, with notable new buys of EDZ20 long dated call spreads vs 9737p.  Yesterday it was 20k each 9775/9812cs vs 9737p paying 1.5 and 9800/9850 cs bought for flat premium vs 9737p.  January 2020 Fed Funds settled +4.5 at 9780.5 which puts odds of a cut by year end over 80%.  

–One last item (apologies for long note today). concerns the Almost Daily Grants missive which highlights AT&T, the most indebted non-financial public company.  The stock fell 4% yesterday on earnings, but the Grants piece says T is now focused on paring back its debt load in order to avoid a ratings downgrade.  The broader picture is that share-buybacks have been one of the main drivers of the stock market in general, directly or indirectly financed with debt.  If the theme of deleveraging were to take hold across a corporate sector now bloated with debt, the implication is that demand for stocks might wane.  Possible tipping point?   On the other hand, MSFT just surged over $1T in market cap….

Posted on April 25, 2019 at 5:27 am by alexmanzara · Permalink
In: Eurodollar Options

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