Jan 23. Nearer part of euro$ curve steeper as market ready to test Fed forward guidance

–Once again some huge trades…first, new highs and new lows.  New highs in front to red one-year calendars as the market pushes up timing of Fed hikes. (For example EDZ4/Z5 up 3.5 to 80.5). New high in red/green/blue pack fly to 6 as red/green closed near 105.5 with green/blue 99.5.  New low in 5/30 spread at 206.7 and in 5/10 at 116.8.
–Large put trades occurred once again on EDH16 and EDM16 underlying contracts, but interestingly there was also large put buying in nearer contracts, notably E0U5 9900/9875ps +50k 8-8.5 (against which was sold mid Sept euribor 9937/9912ps at 4.5), and on the June’15 contract, a buyer of midcurve April 9925/9900/9875ps 5.0s, and 9925/9912/9900/9887p condor 3.0s. E0J 9925p went from no open interest to 151k. So…the theme appears to be that the market will test the Fed’s resolve on forward guidance by pressing on ever nearer contracts.  EDZ14/EDM15 spread settled 33.0, now showing some love for the large recent buyer of 27-30.
–China factory output data was weak this morning.  Also, news continues to swirl around the China trust or WMP fund that could default on 31-Jan.  http://www.zerohedge.com/news/2014-01-22/chinas-first-default-coming-heres-what-expect
–Both gold and treasuries up this morning, trading in tandem recently.  Possible fissures in emerging markets a catalyst for sporadic buying in both?  New lows in both Turkish lira and in CAD.
–Today’s data includes Chgo Fed Nat’l Activity expected 0.9.  Job Claims 330k, Existing Home Sales 4.92m and Leading Indicators +0.2

Posted on January 23, 2014 at 5:18 am by alexmanzara · Permalink
In: Eurodollar Options

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