June 1. NFP

–Employment data today, with NFP expected 190k, Rate 3.9% and Avg Hourly Earnings +0.2  and +2.6 yoy (have heard some estimates at +2.8).

–While 5/30 is holding 32.2, 2/10 made a slight new low for the move at 41.4.  Red/green pack spread closed at a new recent low of just 7.5 bps.  Odds of Fed hikes have been slashed this week and yet the curve remains anchored near new lows, not exactly a vote for robust growth.  On the other hand the Russell is near all time highs.  A less aggressive Fed and gov’t protection?  Should be inflationary…. (as charts below indicate)

–LIB/OIS ticks up yesterday on increase in libor setting to 2.3212.  With only two weeks to go until June expiry, there is buying of both EDM8 9750 puts and 9787 calls for 0.25 (puts bought covered 9766.25).  Obviously there are some concerns related to Europe.  What if DB is put on a list of unstable banks and is downgraded?  Oh…happened yesterday.  What if Spain’s gov’t falls?  Oh.

–EDZ8/FFF9 spread settled 39.5, right at the top of its range.  EDU8/FFV8 closed 38.
–Going into today’s data with fairly meaty June midcurve straddle levels.  0EM 9725 straddle closed 11.5 bps with buying at that level just prior to close.  2EM 9712 straddle is 14.0.  If today’s data comes out as expected, there should be some immediate compression, but it’s worth having (low) bids in for more unsettling news from europe over the next couple of weeks.

Posted on June 1, 2018 at 5:19 am by alexmanzara · Permalink
In: Eurodollar Options

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