Jan 11. Sugar highs?

–Mind numbingly boring day Tuesday with little change in interest rate futures.  Implied vol eased.  There was liquidation of long TYG 123 and 122.5 puts, with open interest falling 20k in the former and 8k in latter.  Continued program buying of TYH 127 calls (8k a day).  Oil continued to slide to new lows, down 114 late to 5081, at the low end of December’s range.  The dollar curve edged slightly lower.  If you believe in the Trump phenomenon, with growth and inflation ramifications, then this a pound on the table and shout from the rooftops time to buy euro$ calendar spreads.  Sure, they could still decline, but these are good risk/reward levels.  For example, red/gold pack spread at 71 is exactly at its 50% retrace from Sept 27 low of 41 to Dec 12 high of 101.5.  Green/Blue June notched a new low yesterday at 35.5 (EDM8/EDM9).  The March spread in front is 41.  Rolls favorably and the absolute level is low in the context of growth and inflation.  EDM7/EDU7 is just 13 bps with an FOMC meeting Sept 20.  Perhaps expectations are a bit frothy (as indicated by the NFIB small business optimism survey released yesterday that soared to multi-year highs at 105.8/chart below) and the curve is already looking ahead; might get some clues from Trump’s news conference today (11:00 EST).  While some have pointed to the actual inauguration as a ‘buy the rumor, sell the fact’ date, today has the potential to preempt that occasion.
–Ten year note auction today with w/i 238 at the futures close yesterday.  In a longer term context, Bill Gross cited a rise above 260 as a mark to the beginning of a bear market in bonds, while Gundlach used the year end 2014 high of 3% as his hurdle.

Posted on January 11, 2017 at 5:28 am by alexmanzara · Permalink
In: Eurodollar Options

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