March 11. Option vol suggests limited downside in interest rate futures
–Fairly quiet day yesterday with interest rate futures floating slightly higher in the wake of Friday’s employment data. Green and blue midcurve straddles eased 1-1.5 bps. Bond vol was smoked, with USM 131^ settling at 3’24, just 7.2 vol. Not exactly indicative of a bear market.
–April treasury options expire one week from Friday. There were some adjustment trades, including an exit sale of 20k TYJ 122p at 4 and a new buyer of about 15k USJ 129p at 6-8. TYJ 123.5^ is 54 and this Friday’s straddle is 32.
–Eurodollar curve was flatter with red/gold pack spread down 2.625 to 275.5. Three year auction today, followed by 10’s tomorrow and 30’s on Thursday.
–Negative signs for global growth continue to emanate from emerging markets. The lowest level for Brazil Bovespa in 4 years was just above 44000 in June of last year as tapering/tightening fears rattled EM. Subsequent rally went over 56000. Yesterday’s sell off nearly completed a nine month round trip to just above 45000. Copper looks the same, lows for the last 4 years in the NY contract have been around 3.00 which was tested early yesterday morning. Iron ore is extending its bear market according to various sources. And the tapering schedule is likely to continue at next week’s FOMC.
–While industrial metals trade heavy, gold is currently threatening a new high for the year, up nearly $5 at 1346.30, apparently regaining safe haven status in times of global strife. (Global excluding the US of A of course).
