May 10. When all you have is a hammer….

–If your only tool is a hammer, then every problem looks like a nail.  If you’re a volatility seller, then you hammer the bid.  For example, Green March 9775 straddles sold in size of 8k yesterday at 54.5, new position, with 311 days to go. USM straddle closed under 2 points with 17 days to go.

–Though volumes were light, yesterday’s modest sell off still caused new highs in some near euro$ calendar spreads.  For example EDM7/EDM8 rose 2.5 to a new high of 43.0 (on heavy buying of EDM7).  And EDZ7/EDZ8 rose 2 to 42.5.  Red/green pack spread (2nd to 3rd year) also made a new high to just above 30, but ranges have been extremely tight.  For example, red/gold pack spread has, on a closing basis, only had a range of 4.75 in the past month!

–Rosengren gave a speech warning about Commercial Real Estate and low cap rates (which are an obvious result of Fed policy) and also touched on GSE reform as GSE’s hold or guarantee 44% of multi unit properties.  The Fed’s Sr Loan survey noted, “on balance, banks reported tightening stds on CRE loans,” and had a special set of questions on that topic.  Obviously, CRE is a large concern of the Fed. Rosengren also warned that higher rates may negatively impact this sector.  Duh.

–Oil is bouncing a bit this morning, though copper is steady,  China’s inflation data was mixed, with slightly lower PPI than expected and CPI a shade stronger.  SHCOMP closed on the low….I believe it’s the low close for the calendar year.

–From a BBG article this morning:

“Demand isn’t expanding as much as expected, and U.S. shale output is growing faster than forecast, according to Vitol Group.”

–N Korea vows to continue nuclear tests and Trump fired Comey.  Not much reaction though treasuries saw a late bid.  Ten year auction today.

Posted on May 10, 2017 at 5:32 am by alexmanzara · Permalink
In: Eurodollar Options

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