March 15. Treasury rates surge
–Huge jump in interest rates yesterday. Ten year treasury rose 15 bps to yield 2.27. Fives were up 13 bps to 1.11%. Curve steepened. 2/10 treasury spread made new high for this year, up 10 to 188. All eurodollar calendar spreads made new highs. As an example, EDZ12/13 which I bought early in the year at 9.5, settled 32, up 7.5 on the day. (I sold mine out at 12).
–The big March midcurve put buyer saw futures cut through the strikes like a hot knife through butter. Blue march 9850 put were bought Tuesday for 2 when futures were 98.595, the contract settled 9841.5, the puts settled 10.25, for a gain of 5x. Easy. Same with 2EH 9912p…bought for 1.0, now 13 in the money. March midcurves expire Friday.
–Yen continues to fall with USD/JPY now 83.86, a huge straight move from 76 in the beginning of February. JGB’s had a good sell off yesterday as fundamentals are finally catching up to Japan.
–Today’s news includes Jobless Claims expected 355k. PPI expected +0.5 with Core +0.2. Philly Fed 11.5 from 10.2.
–There was a post on ZeroHedge positing that the recent avalanche of corporate supply is what has finally turned the tide in the treasury market. Another post on Calculated Risk notes a decline in LA Port traffic, which is another clue in the China slowdown story…and less exports from China probably means that there are fewer dollars to be recycled into US treasury bonds.
–A couple of notes about midcurve March euro$ options which expire tomorrow. All near put strikes saw large declines in open interest, which suggests profit taking. 2EH 9887p, 9900p and 9912p saw declines of 11k, 21k and 28k. 3EH 9850p fell 8k. There was a buyer of about 10k TYJ 130p…open interest there fell 7k.
