March 1. How long before Trump blames Powell?

–Don’t worry stock market investors, Hope Hicks will find another job!  Yes, Trump’s Communications Director resigned. Perhaps now messages from the White House won’t be as smoothly scripted.  On a more serious note, political turmoil could begin to have some market impact, along with announcements like the expected tariffs on aluminum and steel.  When I saw the Hicks news ESH was trading 2717, though most selling yesterday was apparently due to month end rebalancing.  How long will it take for Trump to blame Powell for diminishing the $6 trillion in stock market wealth that he created?  I’ll take the ‘under’ on April 1.

–Once again the eurodollar curve flattened.  Red/gold pack spread settled 25, down 2 on the day.  Reminder, the low print on Jan 4 was 19.375.  Green to blue pack spread (3rd to 4th years) closed at just 5.75 bps; most three month spreads from greens back are now around 1.5 bps.  Precursor to an inversion as Powell takes the stage again in front of the Senate?

–Front end continues to trade heavy.  For example, there was a buyer yesterday of April and May 9750 put strip (2x J and 1x K) for 1.0 vs 9771.  It wasn’t long ago that the market targeted certainty for a June hike at 9787, where March is currently.  Now buying protection another 20 bps lower!?!

–There appears to have been modest liquidation in EDZ8/EDZ9 spread yesterday as both contracts lost about 10k in open interest.  Spread traded 31.5 before closing 32.0 (-2.5 on the day).  High print has been 38.  On Powell’s testimony Tuesday the high was 35.5.  In terms of Powell, I don’t expect him to walk back anything he said Tuesday.  After all, the stock market is not the economy…

–Confidence is high, stocks have been strong.  However, FT reports that overdue credit card debt has hit a seven year high (although, in checking source FDIC data, charge offs for other loans including mortgages and commercial fell slightly).

–Aside from Powell Q&A with Senate, Personal Income and Spending (+0.3 and +0.2) with PCE prices today.  YOY PCE prices expected 1.7 with Core 1.5.  ISM mfg expected 58.7 from 59.1, and ISM prices paid expected 70.0 vs 72.2.

Posted on March 1, 2018 at 5:02 am by alexmanzara · Permalink
In: Eurodollar Options

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