May Day

May 1, 2020

–May Day, a sign of spring but also a commemoration of workers initially relating to the Haymarket Square affair in Chicago in 1886 where a rally of peacefully striking workers turned into a riot as a bomb was thrown. I didn’t realize the location was Randolph and Desplaines, just a few blocks northwest of the old CME floor.

–Markets were fairly quiet yesterday, though post-close earnings reports from AMZN and AAPL led to a sell off in stock futures.  Last in ESM is 2845.50, down 57.0.  Interestingly, that’s below the initial short that Gundlach mentioned he had placed earlier in the week at 2863.  Boeing launched a $25 billion 7 part bond offering yesterday, with the 40 year maturity yielding 4 5/8% above treasuries vs initial talk of a 5 1/2% spread.  Debt issuance continues to be massive over the government and corporate sectors in an effort to plug revenue gaps. At some point, and perhaps we’ve reached it, yields will refrain from probing lower levels given the flood of paper.   

–3 month libor set at a new low yesterday of 55.6 bps, but EDM0 closed -1.5 at 9965.5 leaving a relatively narrow 20 bps of convergence.  Ten year treasury yield eased half a bp to 61.7 with TYM hugging the 139 strike.  There hasn’t been a lot of trade in Sept treasury options but what I did see yesterday was a seller of the TYU 139 straddle from 2’35 to 2’35.  Settled 2’30, just above 4% vol.  General bias was steeper, though red/green pack spread in dollars closed at a new recent low of just 8.25 bps. 

–War of words between US and China continues with implications of a further decline in global trade no matter how soon the virus threat ends.   

Haymarket Square Memorial
Posted on May 1, 2020 at 5:37 am by alexmanzara · Permalink
In: Eurodollar Options

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