June 12. Call buying

–Yields backed up slightly Monday with tens up 2 bps to 295.7, but the dominant theme was call buying in TYU.  Over 100k TYU 120/122 c spreads bought 29-30, settled 30 vs 119-14, 25d.  Open interest +97k and +84k.  TYU 120.5/122.5c spd also bought for 22, 25k.  Open interest in TY declined nearly 28k, which makes it appear as if the call buys were simply a swap for long futures, although perhaps some of the open interest decline was related to the ten year auction.  In any case, option markets indicate that fear is to the upside.  For example, EDZ9 closed 9699.  0EZ 9700/9750 c 1×2 settled 8.5, while equidistant put 1×2 settled 14.0.  The 9750c settled 5.25 with the 9650p 3.50; this in front of a Fed meeting expected to result in a hike with the promise of more, but they sure aren’t reaching for downside.
–IMF’s Lagarde warns of clouds forming over the global economy due to concerns over global trade associated with the G7 meeting.  It was in September 2017 when interest rate futures set panicky highs.  Why?  Because N Korea tensions were at an absolute peak.  It’s different now.  In another sign of easing global stress the gold/silver ratio was down to 76.8 yesterday, nearing the low of the year set in January at 76.7.  The intervening high has been 81.8, and the low in 2016 was 65.7.
–Thirty year auction today.
Posted on June 12, 2018 at 5:19 am by alexmanzara · Permalink
In: Eurodollar Options

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