June 18. FOMC day, with press conference and SEP
–FOMC today. Interest rate futures traded under pressure yesterday with heavy put buying ahead of today’s meeting, with a high CPI reading of +0.4 (and Core yoy of 1.9) emboldening sellers.
–Once again some of the near euro$ calendar spreads made new highs. EDZ14/Z15 +1.5 to a new recent high of 76. There was heavy buying of the peak one year spread, EDZ15/EDZ16 at 110-110.5 in size of about 20k, appears to be new position. (peak one-yr spread last year hit 124).
–FFQ15, August Fed Funds settled almost exactly at 50 bps, down 2.5 on the day to 9951. There will be four FOMC meetings in 2015 prior to this contract, so as of now, the market expects relatively modest tightening by mid year. The tenth quarterly eurodollar contract, which is now EDZ16, settled at 9783 or 2.17%. That’s a new low for tenth qrtly, but only because of the roll with EDM4 having just expired. At end of March/early April the tenth contract put in a low just under 9790.
–Dots from the last FOMC: 2015 avg 1.125 (vs 9894 in EDZ15 or 1.06). 2016 avg 2.42 (vs 9783 in EDZ16 or 2.17%), Longer run 3.875 (vs 9706.5 in EDZ17 or 2.935%). Market currently is expensive to the dots, especially in back, though the critical piece of information will be if Yellen hints at an early tighten.
