March 6. Maybe less gradual than previously advertised?

–Yellen cemented a March hike Friday, and this morning we are seeing slight flattening as longer maturity contracts rally.  Stocks are also seeing some profit taking pressure for which there might be several contributing factors: N Korea lobbed a few missiles, raising the prospect of direct military intervention; China modestly reduced its growth goal to 6.5%; DB is changing course and trying to raise capital through share sales, a reminder that the european banking sector in general retains fragility; rather than soften the idea of upcoming rate hikes, Yellen indicated that adjustment to the neutral rate might occur fairly quickly.  Given subdued VIX, it’s probably worth considering buying VIX spreads…long near contracts and short deferred.

–On Friday, near euro$ one-year calendar spreads pushed to new highs, with June’17/June’18 up 0.5 to 57, having closed at 46 the previous Friday.  5/30 closed at the bottom of this year’s range at 106.  In general, yields were little changed Friday as previous Fed speakers had already done the heavy lifting in terms of preparing the market for a rate hike.

–News today includes Factory Orders expected +1.1 from +1.3 last.  Treasury auctions of 3, 10, 30 year paper commence tomorrow.

Posted on March 6, 2017 at 5:18 am by alexmanzara · Permalink
In: Eurodollar Options

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