Nov 6. Markets shrugged

–Warning from China’s Central Bank Chief:  (BBG) Latent risks are accumulating, including some that are “hidden, complex, sudden, contagious and hazardous,” even as the overall health of the financial system remains good, Zhou wrote…

“High leverage is the ultimate origin of macro financial vulnerability.” “In sectors of the real economy, this is reflected as excessive debt, and in the financial system, this is reflected as credit that has been expanding too quickly.”

–Zhou is expected to retire soon, and the head of the NY Fed, William Dudley, also announced plans to leave the US central bank.  The composition of the FOMC is changing, with Brainard the lone (dovish) holdout on the Fed’s Board.  It’s likely that a more hawkish tilt will result.

–The Saudis are in the midst of a power struggle, with arrests of elites including al-Walled bin Talal. The Saudis also intercepted a missile, warning Iran that it could be considered an act of war.  Oil has had a reaction, with CLZ now trading near $56/bbl, building on new yearly highs set last week.

–Another mass shooting in the US this weekend in Texas, killing at least 26.  As opposed to run of the mill Chicago stats: ytd 557 shot and killed, 2639 shot and wounded.

–Global warnings are met with a shrug in US financial markets, unless of course one considers that flocking to the safe haven of AAPL is the logical outcome.  Implied vol across interest rate products was hammered last week as Powell was named Fed Chair.  Concurrently, the curve flattened to new lows, with 2/10 down over ten bps on the week (82.7 to 71.9) and 5/30 down 8, from 89.5 to 81.6.

Posted on November 6, 2017 at 5:22 am by alexmanzara · Permalink
In: Eurodollar Options

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