June 10. Curve flattening, hint of slightly more aggressive Fed posture next week?
–Green euro$ pack continues to lead to the downside, closing -4.75 yesterday. Since last Thursday close (ECB day), green/gold pack spread has declined 5.5 bps to 122.5. Similarly, five year yield was up 3 bps yesterday to 170, while tens only rose 1.5 to 261. 5/30 made new recent low 177 yesterday, down 1.5 to 2 bps. TYU has so far held Thursday’s ECB spike low to 124-01, while FVU made a new low yesterday. (Saw a trade last week to express relative increase in near vol, buying 0EZ 9900^ at 36 vs selling 3EU 9737^ at 41.0). Given weakness in greens, I would think blue Dec atm straddle would again be trading at parity to green, but blue (97.125^) settled 2.0 over green (97.875^).
–Three year auction today; further pressure on belly of curve. Five year yield should have very strong resistance at 180 yield with several old highs around that level (185 in Sept, 177 in early January and 179 in beginning of April).
–EUR looks to revisit the spike low made on the ECB day of 135. Notably, EURJPY is just through its low from that day, at 138.62. EURUSD is below 200 day moving average, and below 136 which had served as support prior to ECB.
–Crude oil continues to strengthen, pushing to recent highs around 104.50 (CLN +175 yesterday to 104.44).
–FOMC next week on the 18th. July treasury options expire Friday 20th. TUN 109.75 straddle was around 7/64’s yesterday….worth taking a look?
