March 23. Let’s Make a Deal
–The eurodollar curve continues to flatten. June’17/June’18 closed at 47, down 2.5 on the day, down 11.5 from last week’s high of 58.5. All spreads are in support areas currently from both a technical and fundamental basis. On the technical side, most are at the lows since the early part of December. Fundamentally, they’re a hike cheap to Fed pronouncements (if the Fed says there should be three hikes in a year, why are one-yr spreads all below 50 bps). The Fed’s year-end projections for FF 2017 and 2018 are 1.4 and 2.1, a difference of 70 bps. EDZ17/EDZ18 settled 44. Rather than buying spreads, some are just buying cheap vol puts or targeted put spreads. For example, buyer yesterday of 40k 0EM 9812/9800/9787/9775p condor for 2.75. Settled 2.5 ref 9823.0.
–Yellen speaks this morning though there may not be policy implications.
–Health care vote today. If this president is a dealmaker then I would guess it passes. Strong arm threats and promises of favors. If so, perhaps there’s a relief rally in stocks. However, there’s a succinct post on zerohedge outlining over-valuation, including price/EBITDA, Schiller’s CAPE, Mkt cap to GDP and Margin debt. (link below).
http://www.zerohedge.com/news/2017-03-22/5-charts-scream-it
