July 28. Winners and losers

–Might as well start off with the failure of Obamacare repeal.  I don’t usually write about politics, but many market moves were defined by the election and have since deflated, including the dollar.  It was two years ago in July 2015 that Trump said of McCain “He’s not a war hero”…because he was captured.  He followed up those remarks in an interview talking about McCain’s 2008 presidential campaign: “I never liked him as much after that because I don’t like losers.”  McCain’s vote yesterday killed the bill in a huge defeat for Trump.  US equities, which soared post-election and are repeatedly cited by Trump as a symbol of his success, are seeing a bit of profit taking…

–Clearly, the political landscape may only be a footnote markets.  Yesterday was about AMZN, which soared to a new high of 1083 in the morning, and proceeded to fall to 1040 in an outside day.  Earnings were reported post-close and missed.  Another factor that some pointed to was a note by JPM’s quant Marko Kolanovic, who echoed previous warnings about low volatility.  Nothing really new there, many finance luminaries have warned of low vol, but the kid smoking weed, living in his mom’s basement, is still printing money by shorting near VIX for the ‘inevitable’ roll-down.

–The curve steepened with notable selling in the long end.  2/10 rose 2.3 bps to 95.4.  5/30 was only up a bit over 1 bp at 108.3, but seems to have clearly rejected the low made after the June FOMC hike (93.4) and now has legs to advance.  Part of the weakness in the long end may have been spurred by AT&T’s huge bond sale.  There were also some decent size shorts in dollars, for example, 2EV 9775/9750ps 2.5 paid for 15k.  Settled 2.25 ref 9802.5 in EDZ9.

–Interesting clip on FT regarding Japan: “Permanent job vacancies outnumber applicants for the first time.”  If THAT situation doesn’t lead to wage increases what will?  On the other hand, I saw another clip this morning where Amazon is holding a competition for the use of robotics to replace workers in warehouses.  Oh, if we could only get back to the good old days.  The Rolls Royce CEO, in an interview coinciding with the release of the new Phantom VIII, when asked about self-driving vehicles said. “Our customers have access to chaffeurs.”

–Q2 initial GDP today expected +2.6.  Atlanta Fed forecasts 2.8, and some are saying there’s a chance of a 3 handle.  A ‘win’ for Trump to close out the week?

Posted on July 28, 2017 at 5:28 am by alexmanzara · Permalink
In: Eurodollar Options

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