July 17. Curve pounded

–Curve flattener as reds close -4 and golds +0.5.  5/30 plunged 4.7 bps to 146.4.  On a large block two days ago July 14, the prices were 119-075 in the five year (FVU) and 149-13 on the bond (USU).  As of yesterday’s settlement, not much change on the five year at 119-07, but the bond is nearly 2 points different at 151-11.

–Today’s news includes CPI expected +0.3 with Core +0.2. Housing Starts expected 1.125m.

–Dollar continues to firm, with EUR 108.75 late.  New low (again) in the Canadian Dollar, and the Mexican peso is primed to test new lows.  Crude oil settled at a new recent low, with August CL down 45 cents late to 50.96. Again, the fundamental reasons for hiking aren’t strong with both the dollar and energy signaling disinflation pressure, but from this baseline of zero, will it make much difference to the real economy?  On the other hand, what if the Fed’s accommodation has been taken for granted for so long that it’s not the BOND market reacts with convulsions and illiquidity, but stocks?  Yellen indicated the Fed isn’t too concerned about the ups and downs of the stock market; the Fed would likely be happy if some air is let out at the onset of normalization.  VIX surely doesn’t reflect any fear…down again yesterday to near the lows of the year at just 12.11.

Posted on July 17, 2015 at 5:18 am by alexmanzara · Permalink
In: Eurodollar Options

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