May 30. Abenomics continues to provide volatility, Nikkei -5%

–After an early plunge, US interest rate futures came back to close nearly unchanged.  Ten year yield ended just above 212, having tested 220 early in the day.  Red eurodollars were the weakest at settlement, down 2.5 bps, while golds closed up a similar amount (+2.375). While there is still a lot of put buying, the flatter curve may indicate that the rate flush has been stanched for now.  Total open interest in ED was -164k, though TY added 46k.
–Implied vol exploded. TYU 129.5 straddle closed 235 on Tuesday but 245 yesterday with futures little changed.  EDH15 settled -2.5 at 9926.5; atm calls were unchanged. Long dated green straddles were up 2.5 bps. Near calendar spreads made new highs as the market pushes forward the timing for Fed exit.  For example EDZ13/EDZ14 was 11.5/12 in the beginning of the month, now 26, having gained 1.5 yesterday.
–Japan’s stocks fell 5% as Abenomics stokes volatility in financial markets.  Brazil yesterday raised rates more than expected to 8% to fight inflation, in spite of sluggish growth.  Inflation is just over 6.5%, the top of the band.  Quite a contrast between the two countries, one would be tempted to think GDP growth in Brazil is much larger, but Q1 was 3.5 (annualized) in Japan and 0.60 for the quarter in Brazil.
–Revision of US GDP expected unchanged from previous 2.5.  Jobless Claims expected 340k.  Seven year auction.

Posted on May 30, 2013 at 5:38 am by alexmanzara · Permalink
In: Eurodollar Options

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