Sept 10, 2021

This is a good thread from Keith Weiner of Monetary Metals:

But here’s the best clip:
But higher [asset] prices do not compensate for zero yield. Think of it this way… Falling yields are cyanide, the literal poison that Central Banks have introduced in markets. Rising prices are cherry flavoring. Cherry flavoring don’t change the fact you’re drinking cyanide!

The idea is that rising asset prices based on ZIRP have turned into a false trap for the US economy.  

–Implied vol in treasuries pressured lower after the ECB meeting and a stellar 30y auction. TYZ 133 straddle was 2’02 Wednesday and the atm 133.5^ down to 1’58 yesterday, below 4%.  USZ sub 8%.  In the front end there were a couple of plays on EDZ1, though it currently seems as if libor is the one thing that can never ever go up, in part because credit problems have been eradicated like a bad virus.  EDZ1 9975/9968.75ps 0.25 paid 20k and EDZ1 9981,25p vs 0EZ 9937.5p 0.25 paid 5k.  It’s like an insurance booster shot.  EDZ1 settled 9982.0, still a pretty good premium to 3m libor which has been around 11.5 to 12.  EDX1 (Nov contract) settled 9985.5 and still covers the turn of the year.
–In other flow, 2EZ 9875p vs 9918.25 call vs 9900 with 54 delta, flat paid for the put 25k.  Put settled 4.75 and call 5.75 vs 9901.5.–The last couple of days saw accumulation of about 90k TYV 133.5/134cs for 10/64.  After the 30 year auction, tens popped over the lower strike and settled right at it at 133-16.  Call spread settled 14.  Two weeks until expiration.  Midcurve euro$ options expire today.  The market is not anticipating much of a move: late yesterday 2EU 9912.5 puts were 0.5/1.5 ref 9913.5 bid, and 3EU 9975c were 0.5/1.0 vs 9873/73.5.

–Today’s news includes PPI expected 8.2 vs 7.8 last.  EIGHT PERCENT. 

–Small dip in stocks yesterday as Kaplan and Rosengren exited longs and shifted into FI. Who says that regional Fed Presidents can’t influence markets?

Posted on September 10, 2021 at 5:44 am by alexmanzara · Permalink
In: Eurodollar Options

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