Nov 2. Beeks

–“Where in the hell is Beeks?”  Orange juice futures soared to a new high to start November, jumping nearly 5%.  However, a somewhat more important global commodity, crude oil, has gone in the other direction and is sub $46/bbl this morning, having been above $52 in mid October.

–Rate markets are taking their cue from equities, which in turn seem to be reflecting concerns over a Trump win.  The ten year note eased 1 bp to 182,  The green euro$ pack (3rd year) was the strongest part of the curve, closing +3.0.  Both 2/10 treasury spread and red/gold ED pack spread edged to new highs, 99.5 bps and 61.125 respectively.  While equity markets (and the Mexican peso) saw selling pressure related to the US election, it might be worth keeping this in mind: one of the stubbornly weak facets of the US economy has been the lack of investment in productive capacity, with financial stimulus finding its way more into financial asset prices than plant and equipment expenditures.  Would Trump or Clinton better address this shortcoming?

–FOMC meets today.  No press conference.  It would be pretty easy for the Fed to tweak the statement to solidify rate hike expectations for December.  For example, instead of “Market-based measures of inflation compensation remain low…” the statement could say these measures have turned higher.  There will still be three dissents at this meeting. In terms of market pricing, Jan’17 Fed funds traded as low as 9941 yesterday, but came back to settle at 9943, roughly 70% odds of a hike.  Some trades lean against the idea of a hike, for example there was good size buying yesterday of EDZ6 9900/9912/9925 c fy 1x3x2 for 0.5.   Vol remains firm, there was a late buyer of 45 delta TYZ 130c for 45/64’s late in the day, in size of 10k (new).

–ADP expected 165-170k.

–By the way…Trading Places wasn’t supposed to feature Orange Juice futures;  the Chicago Exchanges refused to be a part of the film that might portray trading in a negative light.

Posted on November 2, 2016 at 5:25 am by alexmanzara · Permalink
In: Eurodollar Options

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