July 5. FOMC Minutes today.

–Yields continued to rise with the ten year up 4.5 bps to 234.5 (as of 1pm EST floor close).  The curve also steepened; 2/10 up 1.3 bps to 93.1.  Target on 2/10 should now be 100.  A more obvious upside breakout of the curve was in red/gold euro$ pack spread (2nd to 5th year), which was up only 0.75 to 65.0, but is clearly through the downward sloping trendline from December.  The initial objective should be 70-72.   Nasdaq closed at its lowest level since mid-May, as large cap tech stocks had been trading with all the characteristics of bonds.  Both now appear to be reversing.  GOOGL a leader to the downside as it’s now down 8.6% from the high less than a month ago.  Netflix is actually down 12.25% from the high in early June, though in terms of market cap it’s only 1/10th the size of Alphabet.

–One-year euro$ calendar spreads also gained, with EDZ7/EDZ8 closing 35.5, up 3.0.  The peak one year spread is EDU17/EDU18 which closed at 39.0.

–Treasury vol appears to be confirming the move to higher rates, or, at the very least, indicating fear of a continued sell off.  One week ago Monday the TYQ7 atm straddle, which was the 126.75 line, settled at 0’62.  Yesterday, the atm 125.0 straddle settled 0’63.

–Crude oil added to its impressive bounce since it closed 42.53 on 21-June.   Yesterday was the eighth session in a row with a positive close, trading 46.75 late Monday.  More startling than that has been the rally in grains.  Sept Wheat was 436 ¼ on June 1, and yesterday it closed 555, a gain of 25% in a little over a month.

 

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

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