Jan 4. Pre-employment squaring

-Yields were mixed Tuesday, as an early morning bear steepener reversed by day’s end.  While the 2 yr note rose 2.8 bps to 122.2, tens were up only 1.5 to 243.3 and the thirty year actually fell a fraction of a bp.  Manufacturing ISM was stronger than expected at 54.7, with prices paid surging to 65.5, the highest since late 2011.  The most wicked reversal of the day occurred in crude oil, which was UP $1.50 early in the session, but traded to a low of 52.11, DOWN 1.60 (settled 52.33).  Massive outside day with a close in the bottom part of the range portends further profit taking.

–Moves in the curve echoed oil.  As mentioned, the curve was steeper at the outset but flattened by the close.  For example, EDH’20 (blue March) printed as low as 97.53, down 9.5 on the day, but closed unchanged at 97.625.  This contract was the pivot, everything in front closed lower and contracts behind settled positive.  One of the factors supporting blues was liquidation sales of Blue March and Feb put spreads (9762.5/9737.5ps), reflecting a desire to square up prior to Friday’s employment data.   Once again, new lows were made in euro$ pack spreads, with red/gold falling 4 bps to just 78.5.  USD also reversed from new highs made early in the day.

–News today includes ADP estimated at 172k and FOMC minutes in the afternoon.

Posted on January 4, 2017 at 5:15 am by alexmanzara · Permalink
In: Eurodollar Options

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