March 2, 2018. The Mothra of all tantrums

–(RTRS) “The BOJ’s board members expect that prices will reach 2 percent around fiscal 2019. If this happens, there’s no doubt that we will consider and debate an exit,” Bank of Japan Governor Haruhiko Kuroda told parliament.

BoJ has been the poster child for QE in massive breadth and scale.  Tiptoe towards the exit?  Expect the Mothra of all taper tantrums!  New high for yen.  Probably an invitation to sell Nikkei (and every other risk asset in the world).

–Yesterday’s stock sell off mainly attributed to Trump’s tariffs on steel, aluminum.  On the bright side, it’s only a TRADE war.

–While PCE prices were benign with yoy at 1.7 and Core of 1.5, the Prices Paid component of ISM Mfg was 74.2, the highest since 2011.

–However, yields took a dive, with tens falling 5.8 bps to 281.  Greens were the star performers, settling +10.25 bps.  New low in red/green pack spread to 14.75 (down -0.875).  EDZ8/EDZ9 spread settled 31.0, -1.0.  However, back end of curve is flat-lining: Z9/Z0 is just 7.0 and Z0/Z1 5.0.

–Light on domestic news today, but Italian elections are this weekend.  Grab a bottle of your favorite Barolo and watch the fireworks (and skip the Oscars).

–Unemployment report is one week from today.

Image result

Bonus round: fascinating article link:

The brochure listed the odds of various correct guesses. Jerry saw that you had a 1-in-54 chance to pick three out of the six numbers in a drawing, winning $5, and a 1-in-1,500 chance to pick four numbers, winning $100. What he now realized, doing some mental arithmetic, was that a player who waited until the roll-down stood to win more than he lost, on average, as long as no player that week picked all six numbers. With the jackpot spilling over, each winning three-number combination would put $50 in the player’s pocket instead of $5, and the four-number winners would pay out $1,000 in prize money instead of $100, and all of a sudden, the odds were in your favor. If no one won the jackpot, Jerry realized, a $1 lottery ticket was worth more than $1 on a roll-down week—statistically speaking.

“I just multiplied it out,” Jerry recalled, “and then I said, ‘Hell, you got a positive return here.’”

Posted on March 2, 2018 at 5:13 am by alexmanzara · Permalink
In: Eurodollar Options

Leave a Reply