June 23. Copper and the curve

–The euro is down 116 this morning to 1.1234 as the realization sinks in that europe is stuck with Greece.  Monday’s trade was mostly related to an unwind of positions associated with the possibility of a Greek accident.  2/10 spread jumped a whopping 5.7 bps as tens completely erased Friday’s move, rising 9.3 bps to 235.8, right back to where they were at the end of Thursday (234.9).  5/30 closed at 150, threatening the top end of its recent range.  Gold as well gave away a substantial amount of last Thursday’s rally, falling $17.

–There was good buying during the day of 124.5/127.5 August strangle.  With a close of 125-265 we’re almost in the middle, about 20 bps away from the call and 16-16.5 away from the put, or a range of about 216 to 252 on the current ten yr cash.  Position appears to be new.  Overall, vol edged lower on the day.

–Today’s news includes Durables expected -1.0 but +0.5 ex transportation.  New Home Sales expected 523k.  Treasury auctions kick off with today’s 2 year.
–Chart below shows Copper (red) versus 5/10 treasury spread.  Copper has been quite weak since mid-May, and falling copper typically seems to be associated with a flatter curve.  Probably of little significance on its own, though falling industrial commodity prices are a red flag regarding US growth.

 

Posted on June 23, 2015 at 5:52 am by alex · Permalink
In: Eurodollar Options

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