March 5. Employment week

–The populist wave continued in Italy with a surge in votes for Five Star and League.  The euro absorbed the news easily, US stock futures tested last weeks lows but have rebounded as well.  Rate futures are seeing a small bounce from Friday’s sell off.  Tens rose 4.3 bps Friday to 285.3.  Blues and golds were the weakest on the dollar curve, -6.25 and -6.5.

–China affirmed a growth goal of around 6.5%, while committing to de-risk the financial sector.

–Large trade Friday was buyer of 100k EDZ8 9725/9712 put spread for 1.75.  This trade represents a 4 hike scenario.  Recall that EDZ17 settled just above 9837, so with 4 hikes, EDZ8 would be expected around 9737.  Indeed the 9737 strike was initially targeted before lib/ois spread widened, and there had been selling of the 9725 strike as it seemed out of play.  Targets have now been set lower; EDU8 9750/9737ps is also seeing buyers having settled 2.25 vs 9767.5.  On the long end there was a size buyer >50k TYJ 120/119.5 ps (30k block 10 vs 120-16).  Settled 12 vs 120-06, appears to have been a roll-up as OI declined 16k in 119.5p to 182k (still the peak OI strike) and gained 50k in the 120 strike to 128k.  Also a new buyer of 25k TYM8 119p which settled 36 on open interest increase of 22k.  There are a couple of lows in TYM just below 119-16 from late Feb.  Employment data is Friday which could provide a test of the 3% yield.

–Today’s news includes non-mfg ISM, expected 59.9 from 58.8.

Posted on March 5, 2018 at 5:16 am by alexmanzara · Permalink
In: Eurodollar Options

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