July 21. Value the virtual, not the actual

–Monday was generally quiet, but some of the trends from late last week continued.  For example, CAD made an intraday high above 130, and MXN closed above 16… (so new low for the peso).  Crude oil (CLU5) was down 93 cents late to 50.28, also a new low.  Gold and other commodities were crushed.  The Bloomberg Commodity Index hit its lowest level since 2002!    This index was 100 in 2002, soared to over 220 by 2008 when crude had its moonshot to $140 bbl, and is now back below 100… BELOW the crash levels of 2009.
It’s a market that values tech and financial engineering, not physical things.  Back in late 1999, Merrill Lynch had changed its trademark bull logo into a hologram-like image of swirling multi-colored fiber optic lines.  That logo was quickly demoted to the cyber-trash heap with the Nasdaq crash. (I tried to find an image on Google…no luck).  It’s true that technology has much more fully lived up to its promise in the present period.  But the commodity crush is likely a more ominous sign for global growth.
–In interest rates, yield edged a bit higher, again in the context of a slightly flatter curve. Ten year yield was up 2.4 to 237.1.  5/30 spread made a new recent low at 140.  Implied vol is still compressing, for example TYZ 125^ was trading 3’10 late last week but closed 2’63 yesterday.   Front end eurodollar contracts were under pressure, with a seller of 30k EDU5 at 9961.5 as an example.  White (first year) pack settled -2.75; the selling appeared to be long liquidation as open interest was down in all 4 of the front quarterlies by a combined 37k (-7k, -12k, -12k, -6k).  The high yield ETFs were under a bit of a cloud, with HYG -0.44% and JNK -0.20%.

–No news today…perfect time for turnaround Tuesday.

Posted on July 21, 2015 at 5:18 am by alexmanzara · Permalink
In: Eurodollar Options

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