Jan 30. Rebalancing flows

–Stocks are under some selling pressure this morning, as some point to the immigration suspension as a source of concern, along with the possible border tax.  Another factor might be a note on ZH claiming that tax reform might not occur until spring of 2018.  Net changes are actually quite modest, and given the fact that nasdaq has rallied about 9% since early December, not surprising…perhaps VIX will get a small boost from its close of just 10.58 on Friday.  Obviously, the overarching technical issue is portfolio rebalancing going into month end.

–News today includes Personal Income and Spending, expected +0.4 and +0.5.  Core PCE prices yoy were +1.6 last, so still below the Fed’s goal of 2%.

–The ED curve edged a bit flatter Friday as Feb treasury options expired. Red/gold pack spread eased 2.75 bps to just above 86 bps; the ten year yield fell 2.5 to 248.1.  Nearly all of the 3 month eurodollar spreads out two years are around 1/8%, though EDM18/EDU18 settled at just 11 bps and EDM18/EDZ18 settled at 23.0.  Worth buying the latter for roll-up.  There’s a slight concession for the turn of the year in the Dec’17 contract, which is also evident in the EDZ18 contract.  I.e. the Sept/Dec/March butterflies are +2.5 in the former and +3.5 in the latter.

–FOMC is Wednesday.

Posted on January 30, 2017 at 5:27 am by alexmanzara · Permalink
In: Eurodollar Options

Leave a Reply