March 23. Robotic reaction

–The market has become anesthetized to terrorist attacks, as shown by the muted reaction to yesterday’s events in Brussels.  Even gold, which rallied yesterday and was able to close slightly positive, is down about $14 this morning and appears to be forming a top.  The safe haven rally in treasuries quickly fizzled, with yields closing higher by a few bps.  Tens were up 1.4 to 193.3.  Volume was light.
–There was a buyer yesterday (adding) of about 40k EDK 9912/9937 combos, paying 0.25 to 0.5 for the put (0.75s put and 0.25s call).  This trade is predicated either an April hike, or more certainty of a move in June.   The Fed remains on course for gradual tightening.
–Article on ZH citing Goldman notes the high and increasing rate of delinquencies on subprime auto loans.  http://www.zerohedge.com/news/2016-03-22/could-be-problem-losses-deep-subprime-auto-double-industry-average
I know that the average age of all auto loans has extended and that standards have become looser, though I don’t know if there will be much of a spillover effect from auto subprime.  However, in the UBER economy, it’s worth thinking about from several aspects.  Auto sales are near a record 18 million units, on the back of cheap financing (and leases) and a decline in fuel costs.  Those are the factors that support car services.  What if lending standards tighten and rates edge higher?  At the same time, the trend of cheaper gasoline may have run its course.  Auto sales have been a bright spot for US manufacturing.  About to turn?
–New Home sales today expected 510k.

Posted on March 23, 2016 at 5:23 am by alexmanzara · Permalink
In: Eurodollar Options

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