March 1. The sequester begins; dollar stronger, US treasuries moving higher

–Late failure in ESH (mini SP) saw new lows on the day as the dollar closed right on its highs.  Dollar index (DXY) is at a 62% retrace of last year’s high in June to subsequent low, and moving averages are about to cross indicating further gains. (DXY higher this morning). Foreshadows a deflationary environment.  For example, copper has plunged in February and is at a new low for the year, down around 8% from high of year on Feb 1. (Gold down 6% in Feb, Silver down 12%).  Not everything is deflationary though, the Chicago Tribune reports that Cook County’s additional $1 tax will make the total tax on a pack of cigarettes in Chicago $6.67!
–Global data this morning is weak.  Official China PMI 50.1 vs expected 50.5.  Eurozone unemployment up to 11.9% with Italy now 11.7 (way lower than Spain but the highest in Italy since 1992).  French car sales weak.
–US rates edged slightly lower though there were some large bearish plays yesterday, for example, a new seller of 40k TUM 110.25c at 4.0.  Also on the long end, a buyer of 30k USJ 141/140p spreads late in the day.  Midcurve March options expire two weeks from today.  The short (red) March 9962.5 straddle settled 3.0 and traded there (ref 9962.0) and the Green March 9937.5 straddle settled 6.0 (ref 38.5).  Green March 9925/9950 strangle is around 0.75.  Cheap.
–News in US today includes the beginning of the sequester… not exactly “news”.  Personal Income expected -2.1 with Spending +0.2.  ISM expected 52.8 vs 53.1 last.  Bernanke speaks at 10:00 NY time.

Posted on March 1, 2013 at 5:25 am by alexmanzara · Permalink
In: Eurodollar Options

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