July 20. ECB is the main event today

–Same story as yesterday.  Implied vol under pressure, stocks new highs.  USD edged slightly higher, rates nearly unchanged.  TYU 126 straddle opened 112/113 but was being sold at 1’11 at the end of the day (3.7 vol).  August treasury options expire Friday.   All one-year ED calendar spreads from reds back are around 20 bps.  Red/green pack spread 21.75, Green/blue 19.0, Blue/gold 18.5.  Not much premium built in anywhere for the idea of Fed balance sheet reduction.

–BoJ upgraded growth slightly, but pushed back the inflation target to early 2020.  ECB on tap today.  Most are expecting an announcement to pare back bond buying in September.  Here’s a link with several scenarios:
http://www.zerohedge.com/news/2017-07-19/ecb-or-not-be-heres-what-mario-draghi-may-say-tomorrow
–US news: Philly Fed expected 22.0 from 27.6.  Job Claims 246k.  LEI +0.4. 
–FT notes an op-ed from Warsh, Taylor and Hubbard (all Fed contenders) who think 3% growth is attainable, highlighting tax reform as a major catalyst.  Link here:  
http://www.hoover.org/sites/default/files/research/docs/on_the_prospects_for_higher_economic_growth_0.pdf
–Crude oil closed near its high yesterday, above $47/bbl.  Below is a longer term chart of the rolling front WTI contract vs DXY.  The plunge in oil in 2014 corresponded with a strengthening dollar.  However, given that DXY has deflated this year after the initial euphoria related to Trump’s election, it appears that oil is lagging. 

Posted on July 20, 2017 at 5:22 am by alexmanzara · Permalink
In: Eurodollar Options

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