May 22. 2/10 below 100 bps is NOT a sign of economic confidence

–Crude oil continues to rebound from the plunge in the early part of the month and CLN now trades above $51, having had a close below $46 earlier in May.  Canada and Aussie are lagging the bounce, which is likely an indication that the oil run-up will falter.

–On Friday yields rose around 1 bp, tens were up 0.9 to 224.2.  However, an underlying bid remains in place.  June treasury options expire Friday, with the most open interest in 126, 127, and 128 calls; likely going to be buying to replace those deltas.

–2/10 treasury spread closed at a new low for the cycle just under 97 bps.  Red/gold closed at 65, essentially at new lows as well.  There is nothing to suggest a rebound in yields besides the fact that they are very low.  Fed Governor Brainard speaks this evening, and she’s likely to pour cold water on the economic resurgence story in her own inimitable way.  By the way, she is probably in the top 4 in terms of importance in the Fed’s thinking.  There’s an interesting post on ZH detailing deterioration of lending….here’s a link

Posted on May 22, 2017 at 5:22 am by alexmanzara · Permalink
In: Eurodollar Options

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