Monetary Order

July 15, 2019

–Friday featured a slight decline in rates with tens -1.3 bps to 2.106%.  The curve edged steeper.  There was a large new 5/30 option steepener that blocked, buy of 10k USU9 151 puts at 41 to sell 40k FVU9 116.75c at 11.  5/30 cash closed 77.4 bps.  I marked the ten year treasury/tip spread just above 178 bps, a new recent high.  In the wake of inflation data last week, perhaps some of the Fed’s concerns about being below target are overblown.

–China’s Q2 GDP was 6.2%, lowest in 27 years, however some of the other data including retail sales indicates stabilization.  Bitcoin is down $1400 this morning to 10330 while gold is up 5.50 to $1417.70.  So the net change in bitcoin is almost exactly an ounce of gold.   

–Powell speaks tomorrow…Bretton Woods, 75 years later.  The role of the US dollar and gold in today’s monetary order seems to be in flux currently.  I always recall that some analysts attributed the crash of 1987 to then Treasury Secretary Baker’s threat to devalue the dollar with respect to the German mark.  Now we have the President threatening to match alleged currency manipulation with barely a ripple.  It all echoes in the words of the former mayor of Chicago Richard J Daley, “The police are not here to create disorder, they’re here to preserve disorder.”  Obviously an unintentional slip, but it does seem like current markets are preserving and abetting disorder.  In the words of Billy Ray Valentine, “I suggest using your nightstick officer.”   

Posted on July 15, 2019 at 5:24 am by alexmanzara · Permalink
In: Eurodollar Options

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