March 27. In addition to Fed taper, other signs of tighter credit

–The Fed rejected Citi’s dividend plan, helping to press US stocks lower. The sense of more stringent access to capital could evolve into a global theme, a concern for equity markets.   ECB stress tests are starting, and according to several Reuters stories, banks in China are tightening standards as well.  A bank run in a rural Chinese city is perhaps emblematic of unease about the strength of China’s financial sector.  http://www.reuters.com/article/2014/03/27/us-china-banking-idUSBREA2Q06F20140327
–Treasuries maintained a solid underlying bid throughout the day as the five year auction found strong demand. Durables data revealed continuing softness in capex, “…orders for non-defense capital goods excluding aircraft unexpectedly fell 1.3 percent after rising 0.8 percent in January. This core capital goods measure is a closely watched proxy for business spending plans.” (Reuters)
–News today includes: Q4 GDP 2.7 from 2.4.  Job Claims 323k.
–Implied vol in treasuries is anchored to the lower end of range.  TYM 124 straddle at 1’53, 4.6.  With just over 2 weeks to go, Green April 9825 ^ settled 18.5 ref 9826.5 and Blue April 9725^ at 19.0 ref 9728.0.  The much lower strike on the blue suggests more room to move, but the market remains focused on greens as the pivot point with respect to Fed tightening.

Posted on March 27, 2014 at 5:19 am by alexmanzara · Permalink
In: Eurodollar Options

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