New high gold

August 5, 2020

–On a closing basis, Tuesday was lowest ever yield in tens which are hovering just above 50 bps even as Nasdaq holds near new highs.  On June 30, the ten-year inflation index note was -70.5.  Just over a month later 25 bps of ‘real yield’ has been shaved off, now at negative 105.2.  The euro$ curve continues to flatten.  Red/green pack spread at just 3.5, down 1.25 on the day. The low on Feb 21 was 1.5 but intervening high was over 26.  Red/gold closed down a whopping 6 bps at 30.625 (the low on Feb 21 was 16 and intervening high was 62).  2/10 treasury spread made a new low of 40 bps, down 4.7 on the day as twos yield 11 bps, just 1 bp above EFFR and SOFR. 

–Implied vol firmed ever so slightly in treasuries, but long dated euro$ straddles were crushed, with long greens compressing by 2 to 3 bps.  For example, on Monday, EDH23 9875^ settled 54.0.  With futures up 2 bps to 9980.5, that straddle settled 51.5.   The first 4 months of the year, from the start of Jan to end of April, EDH3 rallied from 9823 to 9961 or 138 bps.   With over 30 months until expiration, the straddle is just over half a percent.  

–A massive explosion rocked Beirut yesterday, probably part of another peaceful protest.  Whether intentional or accidental, gold responded, currently trading $2040 having finished Friday at $1975.  The dollar index had a brief pop to start August, but is again sliding this morning, with EUR 1.1850.  Nasdaq is, of course, edging to another new high this morning.

–News today includes the refunding announcement from Treasury, with ever increasing auction sizes being issued into record high bids of willing investors with the implicit, no, might as well say explicit, backstop of the Fed. ADP expected 1.2 million, and Service ISM 55.0.

I look at the world and I notice it’s turning
While my guitar gently weeps

Posted on August 5, 2020 at 5:44 am by alexmanzara · Permalink
In: Eurodollar Options

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