July 12, 2017. Yellen testifies to Congress today

Link from ZeroHedge contains  the full note of Harley Bassman which suggests many current strategies are short vol and convexity.  This article notes that corporate buybacks have been a large pillar of support for stocks, and that increases in the cost of debt engineered through either the Fed or tax policy could push things over the edge. [esp given record corporate debt]

http://www.zerohedge.com/news/2017-07-11/derivatives-trading-legend-little-4-decline-one-day-could-start-critical-crash

–Today Yellen’s testimony before Congress is at 10:00 EST; the written summary was released last week.  Ten year notes are auctioned at 1:00 and Beige Book at 2:00.

–Large trade yesterday was buyer of 63k TYQ 124/126 strangle for 10.  Settled there in a 9/10 market ref 125-055 (7c, 3p).  Open interest in call was +61k and in put 55k.  Somewhat of an interesting trade in light of Bassman’s comments.

–Yields edged lower again yesterday with tens down 1 bp to 236.1.  Brainard’s speech said that normalization of the funds rate is well under way, opening the path to balance sheet run off, noting that “the global economy is experiencing synchronous growth.”  Later in the speech is this more dovish snippet: “In my view, the neutral level of the federal funds rate is likely to remain close to zero in real terms over the medium term. If that is the case, we would not have much more additional work to do on moving to a neutral stance. I will want to monitor inflation developments carefully, and to move cautiously on further increases in the federal funds rate, so as to help guide inflation back up around our symmetric target.”

Posted on July 12, 2017 at 5:07 am by alexmanzara · Permalink
In: Eurodollar Options

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