Oct 15, 2014. C’mon Kryptonite!

–The slide in oil continues this morning, with CL nearing $80/bbl, down over 6% since Monday’s close near $86.  From BBG: “Brent traded at $83.98 a barrel in London. Contract prices on the fuel fell 26 percent from June 19 through yesterday.”  I think there should be strong support at these levels, but this move has potential to shake up the global financial architecture as forced liquidation in other asset classes occurs.  The disinflationary aspects are of concern to central banks.
–Ten year yield fell to 2.20 yesterday, with 30 year bonds now below 3% at 2.96.  Powerful bid for vol in treasuries and green and blue midcurves.  I marked TYZ vol 5.6 with the 127.5^ at 1’54.  At the 126.5 strike a couple of days ago the straddle was trading 1’41.  New lows in near eurodollar calendars.  Peak one year, EDZ15/16 is just 97 bps.
–“C’mon Kryptonite!”  You know the scene from A Bronx Tale at the racetrack?  That’s how stocks traded yesterday.  With the expectation that they would sprint higher from out of the gate.  Then they glanced over and saw the mush, oil, which dropped $4.  Anyone who thinks a further decline in the price of oil is good for equities is in for a surprise.   http://www.youtube.com/watch?v=8PLSyFzk-6g
–Today’s news includes PPI expected +0.1, both Core and headline.  Retail Sales expected -0.1 but +0.5 less autos and gas.  Empire State 20.5 vs 27.5 and Beige Book.

Posted on October 15, 2014 at 4:19 am by alexmanzara · Permalink
In: Eurodollar Options

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