Long yields edge back up

July 21, 2021


 –Early heavy selling in EDU1 (over 100k down to 9984.5; settled 85.5) helped front calendars settle at new recent lows.  EDU21/EDU22 fell 2.5 to just 14.0, while EDZ21/EDZ22 dropped 3 to just 20.5.  The reds were further supported by the exit of about 70k 0EU 9975/9962/9950 put flies sold at 2.5.  However, longer end yields rose somewhat, rebounding from Monday’s plunge.  Tens up 3.8 bps to 1.218% and bonds +6.3 to 1.878%.  Today features a 20-yr bond auction by the treasury, which faces a hurdle given shrinking yields.  The last 30-year auction went off at 2.00% and tailed about 2.3 bps which sparked a broader sell-off into the end of that day’s session.  Bidding for 20’s might be a bit tentative today.  

–On the dollar curve there was some notable midcurve put buying.  2EQ 9912.5p 5 paid for about 40k (settled 5 ref 9925 in EDU3).  2EU 9912.5/9900ps (3.25s) with 3EU 9875/9862ps (3.50s) 6.5 was paid in a roll-up of strikes about 40k.  Later in the day, over 50k 3EZ 9837.5p bought for 9.5 (settled 9.0 vs 9881.5 in EDZ4).  Net result was a bit of steepening from greens on back: greens (U3 to M4) +2.5, blues (U4 to M5) +0.75 and golds (U5 to M6) -1.75. 

–I’ve attached a chart of Oats (thanks Pat Rooney for pointing out).  While the July 4 BBQ might have been 16 cents cheaper on the year, breakfast seems to be a little more expensive.  Coffee also surging.  We lost the Mr Coffee brand but the Quaker Oats guy seems to be holding his own for now. 

Posted on July 21, 2021 at 5:39 am by alexmanzara · Permalink
In: Eurodollar Options

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