It’s the weekend

July 10, 2020

–Stocks began to retreat on the Supreme Court ruling that paved the way for release of Trump’s tax returns.  Russell led the way, Nasdaq is pretty much immune.  Yields fell, nearing all-time lows.  Tens fell 5 bps to 60.4, while twos ended at 14.9 and this morning are 14.3, a new historic low.  The peak contract on the eurodollar curve shifted out to the third red, EDH2, which settled 9983.5, highest ever for an ED contract in that slot.  Treasury vol is in the dirt, though bond vol firmed just slightly after a solid 30y auction at 1.33%.  There was a new buyer of 30k 3EU 9962/9950/9937 put fly for 1.5; settled 1.25 vs 9966.5 in EDU’23.  July midcurves expire today.

–Every eurodollar contract for the first three years is between 9970 and 9983.5.  There is continued discussion about yield curve control, but it has already occurred.  The Fed’s jawboning has accomplished the demise of the front end.  

–PPI today expected 0.4 with Core 0.1.  The big issue facing the economy is the new stimulus program.  Mnuchin yesterday said the new package will not pay unemployed more than their old wages; the extra kick provided by the $600/week payment will fade.  Mnuchin says he hopes the new package will be passed between July 20 and month-end when the original program ends.  If that DOESN’T happen, watch out below.  Russell is already seeking a safe space as smaller stocks appear vulnerable to the loss of Robinhood support.  Fannie Mae’s mortgage forbearance was at least six months (CARES act) but that too will begin to fade toward the end of the year (thanks JF).   
–Stock futures are a touch lower as of this writing.  Chinese stocks took a profit-taking breather.  Weekend risk remains, with Turkey and Egypt flexing in what for now are military “games” and the US ratcheting up naval pressure in the South Sea. As we’re often reminded, ‘We need to start worrying about what kind of world we are going to leave for Keith Richards.’

Posted on July 10, 2020 at 6:04 am by alexmanzara · Permalink
In: Eurodollar Options

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