March 17. Green beer

–Quiet day Monday with underlying bid in treasuries despite stronger stocks.  Crude oil is the big mover, down over $1/bbl late to 43.80, and off another 50 cents this morning.  Ten year yield fell a couple of bps to 209.5.  Trade in eurodollars was generally biased toward a less aggressive Fed, with some large midcurve put sellers.  There was also a large seller, 50k, of EDU5/EDZ5 spread at 20.5 (settled there, -1.0 on the day, a new recent low).  In what is perceived to be a ‘tightening’ environment, three month calendar spreads well below 1/4% offer a subdued sense of how proactive the Fed might actually be.  Additionally, for those like myself who can’t quite clear away the cobwebs of ‘turn of the year funding pressures’, the preference is to SELL the Dec’15 contract in spreads.  Dec 31 is a Thursday this year so it’s a long turn.  Hey let’s all sell the Dec/March/June fly at -1…
–Commodities remain weak across the board with new lows in the CRB index.  The dollar remains strong.  And US economic data is surprising to the downside.  The Fed’s forward projections are generally too optimistic; even with the removal of ‘patient’ from the FOMC statement, the forward path of rate policy as indicated by the dots appears fancifully hawkish.  I would again note that in the December meeting, the dot average for the end of 2016 was a bit over 2.5%, more than 100 bps higher than what is projected by the EDZ16 contract at 9835.
–News today includes Housing Starts, expected 1.048m.

Posted on March 17, 2015 at 4:30 am by alexmanzara · Permalink
In: Eurodollar Options

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