June 14. This indecision’s buggin’ me

–Many markets are getting stretched to new recent extremes.  Bund yield fell below zero.  New recent high in the yen as $/yen trades 105.74 going into the BoJ meeting.  New low in curve with 2/10 sub 90 and red/gold euro$ pack spread below 60.  New lows in all the euro$ one-year calendar spreads with reds/greens at just 18 bps. Treasuries making new highs this morning with tens down another few bps to 158.  December Fed Funds closed up 1.5 bps at 99.52, suggesting less than 50/50 odds for one hike prior to year end.  European bank shares are getting hammered to new lows.  VIX powered to a new high.  When the stock crash occurs, the Congressional oversight committee will say, “Why were there no warnings?  No one could have seen this coming.”
–The key driver is the upcoming Brexit vote, but of course, the debate is only magnifying growing strength of euro-skeptic parties.  Even if the vote is ‘remain’ the broader issues don’t disappear.  Like the song says, “if I go there will be trouble. if I stay it will be double.” Or, ‘Si me quedo, es doble’ for those who need added emphasis.  No good answers, just the Clash.
–Huge buyer yesterday in red midcurve 0EZ 9875/9850 put spread for 5.5 ref EDZ7 around 9900.  Open interest up approx 170k in each.  OK, that part of the trade works out fine if ‘stay’ wins.  What’s the other leg?  Buy a few VIX calls I would guess, though a little late this morning.
–Retail sales today expected +0.3 Core and +0.3 ex-autos and gas.  Oh, and there’s a Fed meeting coming up too.

 

Posted on June 14, 2016 at 5:26 am by alexmanzara · Permalink
In: Eurodollar Options

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