Jan 23. Kudlow rides to the rescue

–Last week’s stock market euphoria and related weakness in treasuries reversed Tuesday, with stocks lower and rate futures higher.  The ten year yield fell 5 bps to 2.732% while the red euro$ pack was +7.125 (strongest part of the curve).  The one-year calendar EDH9/EDH0 plunged 6 bps from +2.5 on Friday to -3.5 yesterday.  Existing Home Sales were the lowest in three years.  Some of the price action was related to China headlines:  early the FT reported that US/China talks had stalled due to intellectual property issues (stocks lower), then later in the day Kudlow denied any interruption in talks.  ESH immediately rallied to 2633.50 and then pulled back, but bounced again to 2635.50.  Currently holding above this level at 2639.00. 

–Volume remains light, but with February treasury options expiring Friday, there were some rolls of long TYG calls into Week-1 February.  Week-1 expire Feb 1. unemployment day, and the data WILL be released as the BLS is funded.  Open interest in week-1 TY calls rose over 60k, primarily in the 121.5 strike(+25k).  About a year ago, there was always buying of high gamma midcurve euro$ PUTS prior to NFP, now maybe shifted to high gamma CALLS further out on the curve.

–Good read from the MacroTourist:https://www.themacrotourist.com/posts/2019/01/22/australia/

Posted on January 23, 2019 at 5:16 am by alexmanzara · Permalink
In: Eurodollar Options

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