Nov 27. Let’s Make a Deal

–Trump again threatened to slap increased tariffs on Chinese goods if no progress is made on a trade deal this weekend.  The market yawned.  What if, just hypothetically of course, the other side clandestinely  gained access to valuable information in The Art of the Deal and sees this gambit as a transparent bluster?  What if this bold negotiating technique (which we’ve all now seen repeatedly) actually makes progress more difficult?  What if The Lack of a Deal is instantly met with a ‘shock’ depreciation of the yuan?
–Implied vol in rates was pasted yesterday, starting with a notable new sale of 15k TYG 138/141 strangles from 1’55 to 1’44 with a settle at 1’41.  USH 139 straddle sank to 3’44 from 4’00.  Midcurve straddles lost 2-2.5 bps.  While stocks and oil bounced, rates edged only slightly higher, with tens  +1.6 to 3.068.  Pricing for closed books into the end of the year.
–Fed Vice Chair Clarida speaks at 8:30, on Data Dependency and Monetary Policy.  There will be Q&A from the moderator.  Having overtly signaled a shift in the Fed’s emphasis a couple of weeks ago in an interview with Steve Liesman, even the least imaginative market watcher should get the message this time, perhaps using the speech’s title as a clue.  Housing has softened.  Auto sales are dependent on financing rates, and GM announced plant closures yesterday.  Higher rates are biting and the market has now flattened the trajectory of prospective hikes.  The real question is whether it’s bullish or bearish for the longer end of the treasury curve.  Bullish due to a slower economy?  Or bearish because of increased supply and resurgent stocks which are more responsive to intravenous liquidity jolts than economic growth?
Posted on November 27, 2018 at 5:21 am by alexmanzara · Permalink
In: Eurodollar Options

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